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Tax Tip - Reporting your crypto-asset income as an individual carrying on a businessOTTAWA, ON, March 27, 2024 /CNW/ - Crypto-assets are digital assets that exist on a cryptographically secured distributed ledger. There are many types of crypto-assets, the most common being cryptocurrencies, such as Bitcoin, Ethereum and Tether. Transactions related to crypto-assets often have tax implications and must be reported on your income tax return. If you're a crypto-asset user, knowing whether your transactions resulted in a capital gain (or loss) or in business income (or loss) is important because it may affect your taxes. Carrying on a business as a resident of Canada As a resident of Canada, you're generally considered to be carrying on a business if:
However, there are other factors which may indicate that you are carrying on a business and the determination must be made case by case. For example, even an isolated crypto-asset transaction could count as business income when it is considered "an adventure or concern in the nature of trade." Tax filing dates to remember If you or your spouse are self-employed, or considered to be carrying on a business, you and your spouse's tax return is due June 15, 2024. If you or your spouse have taxes owing, your due date for payment is April 30, 2024. How to fulfill your tax obligations To report business income from your crypto-asset transactions, you can find information in Canada Revenue Agency (CRA) guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income. What records should you keep Keep records when you purchase, dispose of, or mine crypto-assets to ensure you have accurate information about your activities. When using third-party software or exchanges for your crypto-asset transactions, maintain and download your original data at regular intervals. You should keep records of the following information for your crypto-asset transactions:
Valuing your business inventory
If you hold crypto-assets as business inventory, you need to know the value and cost of the crypto-assets in order to determine the amount of business income or loss that your business realized. Most of the time, you can use one of the following methods of valuing inventory consistently from year to year:
There may be cases in which you have to use other methods depending on the type of business you have. Accepting crypto as payment for your business If your business accepts cryptocurrency as payment for taxable property or services, the value of the cryptocurrency is calculated based on its fair market value at the time of the transaction. Receiving crypto-assets in exchange for property or services is considered a barter transaction and must be reported as business income. How to correct a previous reporting error You may be able to reduce or avoid penalties and interest by voluntarily correcting your tax affairs in the following ways:
More information For more information to help you determine whether your crypto-asset transactions are made on an account of business income or capital, refer to Information for crypto-asset users and tax professionals. Associated links
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SOURCE Canada Revenue Agency |