Guideline for Crypto
Cryptocurrency and Taxes. As cryptocurrency has become a new way to store value. I have created some guidelines to help. Canadians must be aware of how a cryptocurrency is taxed and their obligations to pay it. Therefore, information hasn’t been updated since 2014 since the Senate reviewed guidelines but here it is.
Taxes of cryptocurrency and how they affect income tax for you
Cryptocurrency is a store of value not a Fiat currency. As well, Crypto is a digital asset that is used more like in a barter system to trade for another asset. Both parties will agree to the value when using it and it is also considered an altcoin.
Transactions of crypto coins are verified through encryption processes. All coin or crypto‘s work independently of central bankers. This is why many have found this very attractive form to store value versus with traditional banks.
Canada revenue agency treats all coin or crypto as a as a commodity under the in Canadian income tax act.
Depending on how the crypto or alt-coin is earned it can qualify as business income or a capital gain. This can subsequently offset it as business loss for capital loss.
Canadian taxpayers must establish a methodology of how they’re earning the cryptocurrency or alt-coin. The taxpayer must show how it was treated either as income or capital gains. Only a small percentages of cryptocurrency users are treating it as business income as they run an operation with cryptocurrency.
In Canada transactions using bitcoin to trade for another item is considered barter. As cryptocurrency and alt-coins are not considered fiat or legal currency In Canada.
You must use a reasonable method to determine the value of the cryptocurrency, when an alt-coin transaction is created. In general the you must take the market value at the highest price a buyer and seller is willing to except for the cryptocurrency Or alt-coin.
If you hold several cryptocurrency’s or alt-coins in your digital wallet they must be accounted for separately.
Cryptocurrency and Taxes