Trying to understand crypto taxes as a Canadian can be tricky, especially if you hold or trade digital assets across borders. Many investors are unsure about what rules apply when the IRS comes into the picture, or how CRA’s approach differs when it comes to reporting and taxing crypto.
The confusion gets worse if you have accounts on US-based exchanges, earn income from staking, or are living between both countries. While both Canada and the US tax crypto, the way they define, report, and apply penalties is not the same.
This guide breaks down the key crypto tax differences between the CRA and the IRS, so you can avoid common pitfalls and stay on the right side of both tax agencies.
CRA vs IRS: Different Definitions of Crypto Assets
The CRA and IRS classify crypto assets differently, which can affect how your transactions are taxed. Understanding these definitions is the first step in staying compliant.
How the CRA Defines Crypto Assets?
The Canada Revenue Agency (CRA) defines cryptocurrencies as a form of commodity, not legal tender. They fall under the category of “digital representations of value” and are treated similarly to other forms of property.
This means any use of crypto, whether it is sold, traded, or spent, can trigger a taxable event. The CRA uses this classification to apply capital gains or business income tax rules, depending on the nature of the transaction.
Read More: Ultimate Guide on Crypto Tax in Canada
How the IRS Defines Crypto Assets?
The IRS defines digital assets more broadly. According to their guidelines, crypto includes convertible virtual currencies, stablecoins, and non-fungible tokens (NFTs). These are viewed as property for federal tax purposes.
Every transaction involving crypto must be reported, and depending on how long the asset is held, it may be taxed as either short-term or long-term capital gains. The IRS also introduced new crypto-related questions on tax forms to ensure complete disclosure from taxpayers.
Read More: Crypto Tax In USA- Ultimate Tax Guide
Income Tax on Crypto: CRA vs IRS Approach
Crypto income is taxed differently in Canada and the US. Understanding how the CRA and IRS treat crypto-related income is key to avoiding mistakes and reducing tax burdens.
Aspect | Canada (CRA) | United States (IRS) |
Asset Classification | Commodity | Property |
Business Income | Fully taxable at marginal tax rate | Reported as ordinary income |
Staking/Mining Income | Often treated as business income | Treated as ordinary income |
Tax Reporting Trigger | Every sale, trade, or use of crypto | Every sale, trade, use, or receipt of crypto |
Holding Period Consideration | Not applicable | Determines short-term or long-term gains |
The CRA considers most crypto transactions as taxable events, treating gains either as capital gains or business income. If you trade occasionally, your profits are usually taxed as capital gains, with 50% of the gain taxable.
However, if you trade frequently or earn income through mining or staking, the CRA may classify it as business income. In that case, 100% of the income is taxable at your marginal rate. Keeping clear records is essential to determining how your activity will be assessed.
How Does the IRS Treat Crypto Income?
The IRS treats cryptocurrency as property, meaning any income from it is subject to taxation. If you sell, swap, or use crypto, the profit is considered a capital gain. The rate depends on how long you held the asset.
Short-term gains (less than 1 year) are taxed as ordinary income, while long-term gains benefit from lower rates. The IRS also taxes crypto earned through mining, staking, or receiving it as payment as ordinary income, which must be reported in the year received.
Capital Gains Rules for Crypto: CRA vs IRS
Crypto capital gains are taxed differently in Canada and the United States. Knowing how each country calculates and applies capital gains tax is essential for accurate reporting and compliance.
Aspect | Canada (CRA) | United States (IRS) |
Taxable Portion | 50% of the total capital gain (rising to 66.67% for large gains in 2024) | 100% of capital gain is taxable |
Short vs Long-Term Gains | No distinction made | Short-term taxed as income; long-term taxed at reduced rates |
Inclusion Rate Change | Increases from 50% to 66.67% after June 25, 2024, for gains over $250,000 | No inclusion rate; flat 100% taxable amount |
Tax Rate Basis | Marginal tax rate applied on taxable portion | Short-term: ordinary income rates; long-term: 0%, 15%, or 20% |
Additional Taxes | None | Net Investment Income Tax (3.8%) may apply |
How CRA Treats Crypto Capital Gains?
In Canada, crypto gains are taxed as capital gains if the activity is considered an investment rather than business. The CRA uses a 50% inclusion rate, meaning only half of the gain is taxable. However, as of June 25, 2024, gains exceeding $250,000 annually (per individual) are subject to a 66.67% inclusion rate.
No Distinction Between Short and Long-Term
The CRA does not differentiate between short-term and long-term holdings. Whether you sell crypto after 2 weeks or 2 years, the inclusion rate and your personal income tax bracket determine your final tax liability.
When Is It Considered Capital Gains?
The CRA generally applies capital gains tax when crypto is held as an investment. Occasional trading, long-term holding, or converting crypto back to fiat typically falls under this category. However, if you’re flipping coins frequently or running a business-like operation, the CRA may consider it business income instead.
How Does the IRS Treat Crypto Capital Gains?
The IRS has clear rules for distinguishing between short-term and long-term capital gains. This distinction affects the tax rate significantly, which can benefit long-term investors.
Short-Term vs Long-Term Gains
If you hold crypto for 1 year or less, any profit is taxed as ordinary income, following your income tax bracket (10% to 37%). If you hold it for more than a year, it qualifies for long-term capital gains, taxed at 0%, 15%, or 20%, depending on your total income.
Additional Tax on High Earners
High-income individuals may be subject to an extra 3.8% Net Investment Income Tax (NIIT) on top of their capital gains tax. This makes tax planning especially important for those with significant crypto assets.
Triggering a Capital Gain
In the US, a capital gain is triggered every time you sell, exchange, or use crypto for goods or services. You must calculate the difference between the fair market value at the time of the transaction and your cost basis.
Reporting Requirements for Crypto Transactions
Both the CRA and the IRS require detailed disclosures of crypto activity. However, the forms, thresholds, and extent of reporting differ significantly between the two systems.
CRA Reporting Obligations
The CRA mandates Canadian taxpayers to report all taxable crypto events, including disposals and transfers. This applies even if no fiat currency is involved.
Capital Gains Schedules
Crypto gains and losses must be reported on Schedule 3 of the Canadian income tax return. Each crypto disposal, whether selling, swapping, or gifting, is considered a taxable event and must be declared.
Form T1135: Foreign Asset Reporting
If the total cost of specified foreign property, including crypto held outside Canada, exceeds CAD 100,000 at any time during the year, taxpayers must file Form T1135. This includes holdings in foreign exchanges and wallets, even if no transactions occurred.
Wallet Address Disclosures
While not yet mandatory, the CRA increasingly requests wallet addresses and transaction records during audits. Keeping organised records of all wallets and their balances at tax time is essential for proving compliance if queried.
IRS Reporting Obligations
The IRS requires all US taxpayers to report crypto activity clearly and transparently across several tax forms. Failure to report can lead to penalties or audits.
Form 8949 and Schedule D
Each taxable crypto event must be listed on Form 8949, detailing the date of acquisition, sale, proceeds, and cost basis. The totals from Form 8949 are then summarised on Schedule D, which reports capital gains and losses on the federal return.
Crypto Checkbox on Form 1040
Every taxpayer must answer a dedicated question on Form 1040 asking whether they received, sold, or exchanged digital assets during the year. This must be answered truthfully, regardless of whether the transactions were profitable or not.
International Reporting: FBAR and FATCA
If crypto is held in foreign wallets or exchanges, US taxpayers may have to file FBAR (FinCEN Form 114) if the value exceeds $10,000 USD at any time during the year. Additionally, FATCA (Form 8938) may be required if thresholds are met, depending on filing status and residency. Both forms aim to prevent offshore tax evasion.
Cost Basis and Valuation Rules
Understanding how each country calculates the cost basis for crypto is essential for accurate gains reporting. Both the CRA and IRS use distinct methods and valuation standards.
CRA Cost Basis Method
The CRA uses the Adjusted Cost Base (ACB) method for calculating the cost of crypto assets. This approach averages the cost of each unit every time new coins or tokens are acquired.
Adjusted Cost Base (ACB)
Under ACB, each time you buy more of the same cryptocurrency, the purchase price is added to your existing cost base and averaged across your total holdings.
For example, if you buy 2 ETH for $1,000 and later another 2 ETH for $1,200, your new ACB is $550 per ETH. When you dispose of any ETH, this average cost is used to calculate the capital gain or loss. |
This method simplifies long-term tracking and is the only accepted method under Canadian tax law. You must maintain accurate records of each transaction to keep your ACB up to date.
IRS Cost Basis Method
The IRS offers more flexibility in determining crypto cost basis, allowing taxpayers to choose the method that benefits them most, provided proper records are kept.
First-In, First-Out (FIFO)
FIFO assumes that the first crypto you bought is the first one sold. This often results in higher taxable gains during periods of rising prices, as older, lower-cost coins are used to calculate profit.
Last-In, First-Out (LIFO)
LIFO assumes the most recently purchased crypto is sold first. In a falling market, this may result in lower capital gains or even losses, reducing your taxable amount. However, LIFO is rarely used because of its audit complexity.
Specific Identification
Specific identification allows you to choose which coin or token is sold in each transaction, assuming you have detailed records. This method is ideal for tax optimization strategies, especially for high-volume traders using multiple wallets or exchanges.
Fair Market Value Determination
The IRS requires you to report crypto transactions using the fair market value (FMV) at the time of the event, in US dollars. This applies to purchases, sales, swaps, and even crypto received as income. Using reliable sources to document the FMV is critical for audit protection.
Differences in Tax Deadlines and Late Penalties
Staying on top of crypto tax deadlines is critical in both Canada and the US. Missing these dates can lead to fines, interest charges, and unnecessary stress. Here’s how deadlines and penalties differ between CRA and IRS.
Aspect | Canada (CRA) | United States (IRS) |
Individual Filing Deadline | April 30 | April 15 |
Self-Employed Filing Deadline | June 15 | April 15 (same as regular deadline) |
Payment Due Date | April 30 (even for self-employed) | April 15 |
Late Filing Penalty | 5% of balance due + 1% per month (up to 12 months) | 5% of unpaid tax/month (max 25%) |
Late Payment Interest | Daily interest on amount owing (compounded daily) | Daily interest until paid, based on IRS rate |
Extension Option | Not applicable | Form 4868: 6-month extension to file, not to pay |
Canada Crypto Tax Deadlines
Canadian taxpayers must report their crypto income by the same deadlines as traditional income. These deadlines vary slightly depending on employment status.
April 30 for Individuals
Most Canadian taxpayers must file their return and pay any tax owed by April 30 each year. This includes all capital gains, crypto income, and related transactions.
June 15 for Self-Employed
Self-employed individuals, including those running crypto businesses, have until June 15 to file their return. However, any tax owed is still due by April 30, which can catch people off guard.
Penalties and Late Interest
- Late filing penalty: 5% of the balance owing plus 1% per month, up to 12 months.
- Interest charges: Applied daily on any unpaid amounts until settled.
The CRA does not offer deadline extensions, so it’s important to plan early and avoid these penalties.
US Crypto Tax Deadlines
The IRS maintains strict deadlines for filing and paying crypto-related taxes. These apply to all taxpayers, regardless of whether their income is from crypto or traditional sources.
April 15 for All Taxpayers
Whether you are salaried or self-employed, April 15 is the standard filing and payment deadline for federal tax returns in the US. Crypto gains, losses, staking income, and other events must be reported by this date.
Penalties for Missing the Deadline
- Late filing penalty: 5% of unpaid tax per month, up to 25%.
- Late payment penalty: Usually 0.5% per month on unpaid tax.
- Interest: Charged daily on outstanding balances.
These penalties can add up quickly, especially for those with substantial crypto income or gains.
Extension Options
Taxpayers may file Form 4868 to receive a 6-month extension to file their return. However, this does not extend the payment deadline. All taxes owed must still be paid by April 15 to avoid interest and penalties.
Key Tax Credits and Deductions
Crypto investors in both Canada and the US can access tax relief through credits or deductions. These incentives can reduce your overall tax bill if used correctly. Let’s explore the most relevant benefits for each country.
CRA Crypto-Relevant Tax Credits
The CRA does not offer crypto-specific tax credits, but several general rules can help reduce your taxable income when dealing with crypto.
Capital Loss Carryforwards
If your crypto portfolio suffered losses, you can carry forward unused capital losses to offset capital gains in future years. This can lower your future tax liability, especially if gains become significant later.
Business Expense Deductions
For Canadians who report crypto as business income, eligible business expenses, like trading software, electricity for mining rigs, and transaction fees, can be deducted to reduce net taxable income.
Other Offsets
Other potential credits include the Canada Workers Benefit (CWB) for low-income earners involved in crypto-related work, or RRSP contributions, which lower overall taxable income and may apply indirectly to crypto earnings reported as part of total income.
IRS Crypto-Relevant Deductions
The IRS does not allow crypto-specific deductions, but crypto investors can still reduce their tax burden with common deductions, especially if they itemize.
Tax Preparation Costs
If you consult a professional or use tax software to file crypto taxes, these expenses may be deductible for certain business filers or under specific conditions.
Investment Advice
Fees paid for portfolio advice or financial consulting related to crypto may be deducted if they meet the criteria for investment expense deductions.
Other Itemized Deductions
While most crypto investors use the standard deduction, high-income individuals with complex portfolios may benefit from itemized deductions such as mortgage interest, charitable donations, or state and local taxes, which indirectly reduce the impact of taxable crypto income.
How Can KoinX Help Track and Report Your Crypto Across Borders?
If you trade or invest in crypto across Canada and the United States, managing taxes for both CRA and IRS can feel like a full-time job. KoinX makes cross-border tax compliance simple with built-in support for both countries’ rules. Here’s how it helps crypto users stay on top of their reporting.
Auto-Import from 800+ Exchanges and Wallets
KoinX connects with over 800 crypto platforms, including major exchanges, wallets, and DeFi protocols. It automatically pulls transaction data and organises it by wallet, type, and asset. This eliminates the need for manual spreadsheets or CSV uploads and helps users maintain a complete view of their crypto activity for both Canadian and US tax filing.
Real-Time Capital Gains Calculation
With KoinX, your capital gains are tracked as they happen. The platform uses precise cost basis methods like ACB for CRA and FIFO or Specific ID for IRS, offering real-time profit and loss reports. This lets users plan taxes ahead of the deadline instead of scrambling at year-end to calculate owed gains or losses.
Support for Both CRA and IRS Rules
Whether you need to file with the CRA, the IRS, or both, KoinX applies the correct tax treatment automatically. It handles unique rules such as the capital gains inclusion rate in Canada and the short-term vs. long-term gain split in the US. This ensures accurate compliance with the rules of each country, all in one place.
Export-Ready Tax Reports
KoinX generates clean, exportable tax reports for every jurisdiction you need, T1135 and Schedule 3 for Canada, or Form 8949 and Schedule D for the US. These reports are built to be shared directly with tax preparers or uploaded to your tax filing software, saving time and avoiding costly filing errors.
Start using KoinX today to make your crypto tax filing stress-free in Canada, the USA, or anywhere else you invest.
Conclusion
Understanding the differences between CRA and IRS crypto tax rules is crucial for anyone investing or trading across Canada and the United States. From cost basis methods to reporting obligations, each country applies its own approach, and missing these details can lead to penalties or inaccurate filings.
If you want to stay compliant and stress-free during tax season, consider using KoinX. It helps you track crypto activity, apply the right tax rules. Join KoinX today and file your crypto taxes with confidence, no matter which side of the border you are on.
Frequently Asked Questions
Do I Need To Pay Taxes On Crypto Held In A US Wallet If I Live In Canada?
Yes, Canadian residents must report and pay taxes on their worldwide income, including crypto held in foreign wallets. You may also need to disclose these holdings on Form T1135 if the total foreign property exceeds CAD 100,000.
How Are Crypto Gifts Treated For Tax Purposes In Canada And The US?
In Canada, gifting crypto is considered a deemed disposition and may trigger capital gains tax. In the US, the giver may need to file a gift tax return if the value exceeds annual limits, though no immediate tax is due for most recipients.
Are There Any Tax Treaties That Help With Cross-Border Crypto Transactions?
Yes, the US-Canada tax treaty can help reduce or eliminate double taxation. It includes provisions for tax credits, defined residency rules, and mechanisms to resolve disputes between the CRA and IRS regarding income classification.
Do Both CRA And IRS Require Disclosure Of Crypto Wallets?
Yes, both agencies expect disclosure. CRA requires reporting foreign-held crypto assets through Form T1135, while the IRS asks about digital assets directly on Form 1040 and requires FBAR or FATCA filings for qualifying foreign accounts.
