- Cryptocurrency ETFs hold actual cryptocurrencies, so they are a more direct way to gain exposure to cryptocurrencies than stocks of publicly traded companies that engage in cryptocurrency activity.
- Cryptocurrency ETFs qualify for tax-advantaged accounts such as Tax-Free Savings Accounts (TFSA), Registered Retirement Savings Plans (RRSP) and First-time Home Buyer Savings Accounts (FHSA). (More on cryptocurrencies and taxes below.)
Tax season is here—here’s what you need to know
The Canada Revenue Agency (CRA) considers cryptocurrencies to be commodities, and the purchase and sale of cryptocurrencies may result in capital gains or losses. Therefore, if you sell cryptocurrency in 2024, you may be subject to capital gains tax or have a capital loss that can be used to offset other capital gains.
Here’s how Canadian capital gains tax works, including on cryptocurrencies: 50% of capital gains are added to your income and taxed at your marginal tax rate. Read MoneySense’s guide to Canadian cryptocurrency taxes, as well as my article on Canadian crypto ETF taxes.
For example: Let’s say you bought 1 Bitcoin on January 8, 2024 for $62,722 and sold it on December 14, 2024 for $144,733. Tax. The calculation is as follows:
Trudeau resigns – leading to capital gains tax uncertainty
Calculating capital gains tax can be very simple as long as you have records of all transactions. However, if your capital gains exceed $250,000, things can get more complicated.
If your capital gains exceed $250,000, your inclusion rate for gains over $250,000 may be two-thirds (66.67%). Although this higher rate is introduced in 2024, there is still uncertainty over whether and how it will be implemented in 2025 and beyond.
Why? Capital gains tax reform had yet to be passed into law when Prime Minister Justin Trudeau announced his resignation and prorogued Parliament until March. However, Treasury said the CRA will continue to administer these changes during the recess. Here’s what we know so far about changes to capital gains taxes over the intersession period.
Cryptocurrency price fluctuations are common
The prices of Bitcoin, Ethereum and other cryptocurrencies are speculative and can fluctuate wildly. While the long-term trend for cryptocurrencies looks strong, investors should remember that deep and sudden bear markets are part of cryptocurrency history and should be expected in the future.
As always, use caution and only consider cryptocurrencies if they fit your financial goals, time horizon, and risk profile. Only invest money you are willing to lose, and be wary of cryptocurrency scams.
