- Crypto ETFs contain actual cryptocurrencies and are due to this fact a more direct strategy to gain exposure to cryptocurrencies in comparison with shares of a public company that engages in cryptocurrency activities.
- Crypto ETFs are eligible for tax-advantaged accounts reminiscent of Tax-Free Savings Account (TFSA), Registered Retirement Savings Plan (RRSP), and First Home Savings Account (FHSA). (More on crypto and taxes below.)
It’s tax season – here’s what you must know
The Canada Revenue Agency (CRA) considers cryptocurrencies to be commodities, the acquisition and sale of which can end in a capital gain or loss. So for those who sold cryptocurrencies in 2024, chances are you’ll either must pay capital gains tax or suffer a capital loss that you could use to offset other capital gains.
This is how capital gains tax works in Canada, including for cryptocurrencies: 50% of the capital gains are added to your income and taxed at your marginal tax rate. Read MoneyDown’s guide to crypto taxes in Canada and my article on crypto ETF taxes in Canada.
Here’s an example: Let’s say to procure 1 Bitcoin on January 8, 2024 for $62,722 and sold it on December 14, 2024 for $144,733. You would owe $12,301.65 in capital gains tax. Here is the calculation:
Trudeau resigns – resulting in capital gains tax uncertainty
Calculating your capital gains tax could possibly be fairly easy so long as you could have records of all of your transactions. However, if you could have a capital gain of over $250,000, things can get more complicated.
If your capital gains are over $250,000, your inclusion rate for gains over $250,000 could possibly be two-thirds (66.67%). Although this higher rate was introduced in 2024, there stays uncertainty as as to whether and the way it should be implemented in 2025 and beyond.
Why? The capital gains tax changes had not yet taken effect when Prime Minister Justin Trudeau announced his resignation and Parliament adjourned until March. However, the Treasury Department has stated that the CRA will proceed to administer the changes in the course of the prorogation. Here’s what we all know thus far about capital gains tax changes during prorogation.
Cryptocurrency price fluctuations are common
The prices of Bitcoin, Ethereum and other cryptocurrencies are speculative and subject to extreme fluctuations. Even though the long-term trend in cryptocurrencies looks strong, investors should consider that deep and sudden bear markets are a part of cryptocurrency history – and are to be expected in the longer term.
As all the time, watch out and only consider crypto if it aligns along with your financial goals, time horizon and risk profile. Only invest as much money as you might be willing to lose and be looking out for crypto scams.
