Selling or exchanging crypto assets can have tax consequences, even when no amount is converted into Canadian dollars. Depending on the nature of the activities, the resulting gains and losses may be treated as capital gains or losses, or as business income or losses. Unlike capital gains, net business profits are fully included in income for tax purposes. [1]
This guide is intended for individuals and corporations. It explains how to identify business income arising from crypto assets, calculate inventory costs and deductible expenses, account for business losses, and report the results on federal and Quebec income tax returns.
When Do Crypto Asset Activities Constitute a Business?
The tax treatment depends on the nature of the activities carried out, rather than simply on the fact that they involve crypto assets. To distinguish business income from capital gains, tax authorities consider several factors, including:
- The taxpayer's intention when acquiring the crypto assets;
- The frequency and volume of transactions;
- The holding period of the assets;
- The taxpayer's knowledge and experience;
- The time, resources, and financing devoted to these activities.
No single factor is conclusive. Even an isolated transaction may give rise to business income if it constitutes an adventure or concern in the nature of trade. These principles apply to both individuals and corporations. [1]
It is also important to distinguish between a business that buys and resells crypto assets and one that simply accepts them as payment. In the latter case, selling goods or providing services generates business income, but the crypto assets received do not automatically become inventory held for resale.
For more information on this distinction, see our guide to capital gains and losses.
What Crypto-Related Income Must Be Reported?
Several crypto-related activities can generate business income, including trading, mining, and selling goods or providing services in exchange for crypto assets. The following sections explain the tax treatment of these different activities.
Buying, Selling, and Exchanging Crypto Assets
Selling or exchanging crypto assets constitutes a disposition for tax purposes, regardless of whether the resulting gain or loss is treated on capital or income account. When these transactions are carried out as part of a crypto trading business, the proceeds are included in business revenue, while the cost of the assets sold or exchanged is accounted for through the cost of goods sold.
For income-tax purposes, the transaction value must generally be determined in Canadian dollars at the time of the exchange, subject to a valid functional-currency election by an eligible corporation. [19] Crypto assets acquired for resale must also be tracked as inventory to calculate the cost of goods sold and the value of closing inventory. [1] [3]
Goods and Services Paid for With Crypto Assets
A business that receives crypto assets as payment for goods or services must include the value of the consideration received in its income, in accordance with the usual revenue recognition rules. Accepting payment in crypto assets does not make the sale tax-exempt.
For example, if a corporation invoices CAD 4,000 for a service and receives BTC of equivalent value as payment, it must report CAD 4,000 as revenue from that service. If the corporation subsequently holds the Bitcoin, any later sale or exchange is a separate transaction whose tax treatment depends on how the assets are classified for tax purposes. [1] [5]
Accepting crypto assets as payment does not relieve a business of its GST/HST and QST obligations when these taxes apply to the sale of goods or services. [14] [18]
Mining and Staking
The tax treatment of mining and staking rewards depends on the nature of the activities involved. For mining, it is important to determine whether the activity constitutes a business or is pursued as a hobby. Staking rewards, on the other hand, may constitute business income or income from property, depending on the circumstances.
Mining
According to the Canada Revenue Agency (CRA), crypto mining activities constitute a business in most cases, particularly because of the resources required to operate them. When mining is carried on as a business, the value of the crypto assets received as rewards must be included in business income when the rewards are earned. [2]
Staking
Staking rewards may also constitute taxable income, even when the taxpayer is not carrying on a business. Depending on the circumstances, they may be treated as business income or income from property.
For staking conducted through a centralized platform, the CRA indicates that rewards are generally included in income when they are credited to the taxpayer's wallet on that platform. [2]
When mining or staking rewards are included in income, the amount reported must also be taken into account in determining the tax cost of the cryptoassets received. If the cryptoassets are held as capital property, subsection 52(1) of the Income Tax Act and section 302 of Québec's Taxation Act require that amount to be added to their cost, to the extent it has not already been included. If the cryptoassets are held as inventory, that value is taken into account in determining their acquisition cost, and the applicable inventory valuation rules continue to apply.
Decentralized Finance (DeFi) Transactions
The tax treatment of decentralized finance (DeFi) transactions depends on how the protocols operate and the rights transferred. For example, depositing crypto assets in exchange for receipt tokens may constitute a disposition, while rewards received may constitute business income or income from property, depending on the circumstances.
How to Calculate the Profit or Loss of a Crypto Trading Business
Business income is generally calculated using the accrual method of accounting. Revenue is therefore recognized when it is earned, even if payment is received at a later date. [5]
For a business that buys and resells crypto assets, profit is calculated using revenue from sales and exchanges, the cost of goods sold, and other deductible expenses.
The cost of goods sold is calculated as follows:
Cost of goods sold = Opening inventory + Purchases for resale − Closing inventory
Net profit is then determined as follows:
Net profit or loss = Business revenue − Cost of goods sold − Other deductible expenses
This calculation accounts for crypto assets that remain in inventory at the end of the fiscal year. Their acquisition cost should therefore not automatically be deducted in full during the year of purchase without accounting for closing inventory. [1]
Example: Calculating Profit From Crypto Trading Activities
Suppose an individual or corporation operates a crypto trading business. The following amounts are recorded for the year in Canadian dollars:
| Item | Amount (CAD) |
|---|---|
| Sales and exchanges of crypto assets | $80,000 |
| Opening inventory | $20,000 |
| Purchases of crypto assets for resale | $50,000 |
| Closing inventory | $18,000 |
| Other deductible business expenses | $6,000 |
The cost of goods sold is:
$20,000 + $50,000 − $18,000 = CAD 52,000
The net profit is therefore:
$80,000 − $52,000 − $6,000 = CAD 22,000
Subject to any applicable tax adjustments, this profit is fully included in calculating income. The 50% inclusion rate applicable to capital gains does not apply to business profits. This example assumes that inventory has been properly valued and that the expenses are deductible.
How to Value Crypto Asset Inventory
The value assigned to crypto assets held as inventory at the end of the fiscal year affects the calculation of taxable business profit. The CRA identifies two inventory valuation methods:
- Lower of cost and fair market value: Each item of inventory is valued at the lower of its cost and fair market value;
- Fair market value of the entire inventory: All inventory is valued at its fair market value at the end of the fiscal year.
Special rules apply to adventures or concerns in the nature of trade, for which inventory must be valued at cost. The appropriate method must be determined based on the nature of the business activities and applied consistently from year to year. Depending on the method used, inventory values may affect taxable income even when certain crypto assets remain unsold. [3]
What Business Expenses Are Deductible?
A business may deduct reasonable expenses incurred to earn business income, provided they meet the applicable tax requirements. Depending on its activities, deductible expenses may include:
- Exchange, brokerage, and network fees related to business transactions;
- Software subscriptions, analytical tools, and services used in the business;
- Accounting and professional fees related to business activities;
- Electricity, hosting, and maintenance expenses, particularly for mining operations;
- Salaries and other eligible operating expenses.
Not all expenses can be deducted immediately as current operating expenses. Certain costs incurred to acquire crypto assets for resale must be included in the cost of inventory. Personal expenses are not deductible as business expenses. [4] [3]
Depreciable property, such as certain mining equipment, may instead qualify for capital cost allowance (CCA). The CRA indicates that ASIC mining devices and GPU-based mining systems may fall under Class 50, depending on their characteristics and the applicable conditions. [2]
When an expense is paid using crypto assets, the payment constitutes a disposition of the crypto assets used. The tax consequences of this disposition must be accounted for separately from the deduction of the expense.
How Do Business Losses Work?
Business losses are treated differently from capital losses. They are first taken into account when calculating net income for the year and may, subject to applicable rules, reduce income from other sources.
When eligible losses cannot be fully utilized during the year, the unused amount may contribute to a non-capital loss, which can be:
- Carried back to the three preceding taxation years;
- Carried forward to the following twenty taxation years.
The amount available for carryforward or carryback depends on the taxpayer's tax calculations. It is therefore essential to distinguish losses arising from trading or mining businesses from capital losses, which are subject to different deduction and carryover rules. [12] [15]
How to Report Business Income and Expenses Federally and in Quebec
Crypto-related business income and expenses must be reported for the applicable taxation year. The required forms differ depending on whether the taxpayer is an individual or a corporation.
The instructions below apply to the 2025 taxation year. Form requirements and line numbers may change in subsequent years.
For Individuals
Federal Income Tax Return
An individual carrying on a business reports revenue, cost of goods sold, and expenses using Form T2125 — Statement of Business or Professional Activities. The CRA also accepts certain financial statements containing the required information. The resulting profit or loss is then included in the individual's T1 income tax return. A separate form may be required for each business operated. [6] [16]
Quebec Income Tax Return
A self-employed individual uses Form TP-80 — Business or Professional Income and Expenses, or acceptable financial statements, and reports the results on Schedule L of the TP-1 income tax return.
For crypto-related business activities, Form TP-21.4.39 — Cryptoasset Return includes two amounts in Part 4.2:
- Line 111: Gross business income, to be transferred to line 16.1 of Schedule L;
- Line 112: Net business income or loss, to be transferred to line 26.1 of Schedule L.
Business income is then included on line 164 of the TP-1 income tax return. The applicable forms must be filed with the return. [7] [8] [11]
For Corporations
Federal Corporate Income Tax Return
A corporation reports its business results on its T2 corporate income tax return, based on its accounting records and financial statements. Schedule 1 — Net Income (Loss) for Income Tax Purposes is used to reconcile accounting income with income for tax purposes when adjustments are required. Form T2125 does not apply to corporations. [9]
Quebec Corporate Income Tax Return
A corporation subject to Quebec income tax reports its results on the CO-17 corporate income tax return. If its net income for tax purposes differs from the amount reported in its financial statements, Form CO-17.A.1 — Net Fiscal Income is used to make the necessary adjustments. [10]
Business income and losses arising from cryptoasset transactions are also reported in Part 4.2 of Form TP-21.4.39, on lines 111 and 112. Unlike the reporting requirements for self-employed individuals, these amounts are not transferred directly to a separate line of the CO-17 return. However, they must be included in the corporation's gross revenue and net income or net loss. [11]
Additional Crypto Asset Reporting Requirements in Quebec
Form TP-21.4.39 — Cryptoasset Return is not limited to reporting business income. It also covers the ownership of and certain transactions involving crypto assets, as well as mining and staking rewards. Filing may therefore be required even when no profit has been realized.
Merely receiving and retaining cryptoassets as payment for goods or services does not, by itself, require completion of Part 4.2 of Form TP-21.4.39. In the absence of other cryptoasset transactions or income, generally only Parts 1, 2, 3 and 5 are required. Income from the underlying sales or services remains reportable under the usual rules. Property income or losses arising from cryptoassets are instead reported in Part 4.3. Mining and staking rewards require separate treatment. See our guide to Form TP-21.4.39.
For the 2025 taxation year, affected taxpayers must also answer the question concerning crypto assets on their income tax returns:
- Line 24 of the TP-1 return, for individuals;
- Line 19b of the CO-17 return, for corporations.
Form TP-21.4.39 must be filed with the Quebec income tax return when the filing requirements are met. [11] [17] [10]
What Records Should You Keep?
Accurate bookkeeping requires a complete transaction history, including transactions that do not involve deposits or withdrawals in traditional currency. Records should include:
- Transaction dates and times, quantities, and types of crypto assets involved;
- Values in Canadian dollars and, where applicable, in the corporation’s elected functional currency, along with exchange rates and pricing sources used; [19]
- Exchange statements, wallet addresses, and on-chain transaction records;
- Invoices and other supporting documentation for income and expenses;
- Quantities and values of opening and closing inventory, when crypto assets are held as inventory;
- Details of mining or staking rewards and how they were recorded;
- Information needed to distinguish internal transfers, payments, and dispositions.
For corporations, these records must also support the reconciliation of crypto asset transactions with accounting journal entries and tax returns. [13]
Need Help Calculating and Reporting Your Crypto-Related Business Income?
Calculating revenue, cost of goods sold, and deductible expenses can become complex when transactions span multiple years, exchanges, or protocols.
Token Expert helps individuals and corporations reconstruct their transaction histories, prepare their accounting records, and calculate the amounts required for their tax returns.
Contact our team to discuss your situation.
References
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Canada Revenue Agency. Reporting income from crypto-asset transactions.
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Canada Revenue Agency. Reporting income from crypto-asset mining and staking activities.
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Canada Revenue Agency. Determining the value of crypto-assets for tax filing.
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Canada Revenue Agency. Business expenses.
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Canada Revenue Agency. Accounting for your earnings.
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Canada Revenue Agency. T2125 — Statement of Business or Professional Activities.
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Revenu Québec. Line 164 — Business Income.
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Revenu Québec. TP-80 — Business or Professional Income and Expenses.
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Canada Revenue Agency. T2SCH1 — Net Income (Loss) for Income Tax Purposes.
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Revenu Québec. CO-17.G — Guide to the Corporation Income Tax Return (available in French only).
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Revenu Québec. TP-21.4.39 — Cryptoasset Return.
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Canada Revenue Agency. Line 25200 — Non-capital losses of other years.
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Canada Revenue Agency. Keeping books and records of crypto-assets for tax filing.
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Canada Revenue Agency. Collecting and remitting GST/HST from crypto-asset transactions.
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Canada Revenue Agency. T2 Guide — Non-capital losses.
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Canada Revenue Agency. T4002 — Self-employed Business, Professional, Commission, Farming, and Fishing Income, Chapter 2.
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Revenu Québec. Line 24 — Crypto Assets.
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Revenu Québec. Taxable Supplies — GST/HST and QST.
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Canada Revenue Agency. Income Tax Folio S5-F4-C1 — Income Tax Reporting Currency. Paragraphs 1.8, 1.10 and 1.18–1.19.
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Canada. Income Tax Act, subsection 52(1) — Cost of certain property the value of which included in income.
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Québec. Taxation Act, section 302 — Cost of certain property the value of which included in income.
Disclaimer
This article is provided for informational purposes only and does not constitute tax, accounting or legal advice. The applicable treatment depends on the facts and the taxpayer's circumstances. Tax rules and filing requirements must be verified for the relevant taxation year.
Last reviewed: October 23, 2026.
