Capital Gains and Losses on Crypto Assets: How to Calculate and Report Them in Canada

Exchanging one crypto asset for another constitutes a disposition for tax purposes, just like selling crypto assets for Canadian or U.S. dollars. Such transactions may therefore result in capital gains or losses, even when no cryptocurrency is converted into traditional currency. However, the tax treatment depends on the nature of the taxpayer's activities, as certain transactions may instead give rise to business income or losses. [1]

This guide is intended for both individuals and corporations. It explains how to determine whether a transaction results in a capital gain or loss, calculate the adjusted cost base (ACB), apply the rules governing capital losses, and report the results on federal and Quebec income tax returns.

Capital Gains or Business Income: How to Tell the Difference

Before calculating a capital gain or loss, it is important to determine whether the crypto assets are held as capital property or as part of a business activity.

In making this distinction, tax authorities consider several factors, including:

• The taxpayer's intention when acquiring the crypto assets;
• The frequency of transactions;
• The length of time the crypto assets are held;
• The taxpayer's knowledge and experience;
• The time and resources devoted to these activities.

No single factor is conclusive. The tax treatment depends on an assessment of all the relevant facts and circumstances.

This distinction applies to both individuals and corporations. Crypto assets held by a corporation may therefore qualify as capital property or inventory, depending on the nature of its activities.

Disposing of crypto assets held as capital property may result in a capital gain or loss. Conversely, profits and losses arising from commercial activities, including an adventure or concern in the nature of trade, are treated as business income or losses. [1]

What Transactions Constitute a Disposition?

The following transactions constitute dispositions of crypto assets for tax purposes:

• Selling crypto assets for Canadian dollars, U.S. dollars, or another traditional currency;
• Exchanging one crypto asset for another, including a stablecoin;
• Using crypto assets to purchase goods or pay for services;
• Gifting crypto assets or transferring their ownership to another person.

Certain dispositions, particularly transfers between persons who do not deal at arm's length, may be subject to specific tax rules.

You do not need to withdraw funds from an exchange or convert crypto assets into Canadian dollars to realize a taxable gain. For example, exchanging Bitcoin (BTC) for Ether (ETH) constitutes a disposition of the BTC. [1]

By contrast, transferring crypto assets between two wallets belonging to the same taxpayer does not constitute a disposition if there is no change in beneficial ownership. Similarly, a decline in the value of a crypto asset does not, by itself, result in a realized capital loss.

What About DeFi Transactions?

Certain decentralized finance (DeFi) transactions, such as wrapping, depositing assets into protocols, or using cross-chain bridges, require a closer examination of the rights and property being transferred. These transactions should not automatically be treated as dispositions, nor should they all be presumed tax-neutral.

In technical interpretation 2023-0973071I7, the Canada Revenue Agency (CRA) concluded that depositing crypto assets into a liquidity pool in exchange for representative tokens (receipt tokens), as well as subsequently selling or redeeming those tokens, constituted dispositions for tax purposes. However, the CRA noted that, given the diversity of DeFi arrangements and mechanisms, its conclusions might only apply to the specific situation examined. [2]

How to Calculate a Capital Gain or Loss

Three elements are used to calculate a capital gain or loss:

• Proceeds of disposition: The value received in exchange for the crypto asset disposed of;
• Adjusted cost base (ACB): The tax cost of the crypto asset at the time of disposition;
• Expenses incurred to make the sale: Eligible expenses incurred in connection with the disposition of the crypto asset.

Capital gain or loss = Proceeds of disposition − ACB − Expenses incurred to make the sale

When one crypto asset is exchanged for another, the value of the transaction must be determined at the time of the exchange. This value is used to calculate the proceeds of disposition of the crypto asset given up and the acquisition cost of the crypto asset received, subject to applicable tax rules.

Amounts used to calculate income tax must generally be determined in Canadian dollars, even when transactions are conducted in U.S. dollars or entirely in cryptoassets. An eligible corporation that has made a valid functional-currency election must instead use its elected functional currency for the calculations covered by that election. [13]

The values used must be based on a reasonable and consistent valuation and currency conversion method. Taxpayers should also retain the supporting information necessary to substantiate their calculations to the tax authorities. [3]

How to Determine the Adjusted Cost Base

The adjusted cost base (ACB) of a crypto asset generally consists of its acquisition cost, plus eligible acquisition expenses and other adjustments required under Canadian tax rules.

When multiple units of the same crypto asset qualify as identical properties, their ACB must be calculated using the average cost method.

This method requires taxpayers to combine all identical units they own, even when those units are held across different exchanges or wallets. Taxpayers cannot arbitrarily select the units with the most advantageous acquisition cost when calculating a capital gain or loss.

The average cost must be recalculated after each additional acquisition of identical property. [4]

Example: Exchanging BTC for ETH

Suppose an individual or corporation holds Bitcoin as capital property and completes the following transactions:

1. Purchases 0.5 BTC for CAD 20,000.
2. Purchases 0.5 BTC for CAD 30,000.
3. Exchanges 0.2 BTC for ETH worth CAD 15,000.

After the first two purchases, the taxpayer owns 1 BTC with a total ACB of CAD 50,000, representing an average cost of CAD 50,000 per BTC.

The ACB of the 0.2 BTC exchanged is therefore:

0.2 BTC × CAD 50,000 = CAD 10,000

The capital gain realized on the exchange is calculated as follows:

Item	Amount (CAD)
Proceeds of disposition of 0.2 BTC	$15,000
ACB of 0.2 BTC	$10,000
Realized capital gain	$5,000

After the transaction:

• The taxpayer retains 0.8 BTC with a total ACB of CAD 40,000.
• The ETH received has an acquisition cost of CAD 15,000, which is added to the ACB of any identical ETH units already held, if applicable.

This example illustrates how exchanging one cryptocurrency for another can trigger a capital gain, even without converting any crypto assets into traditional currency.

What Portion of a Capital Gain Is Taxable?

In Canada, the capital gains inclusion rate is 50% for both individuals and corporations. [5]

In the previous example, the capital gain of CAD 5,000 results in a taxable capital gain of CAD 2,500.

The inclusion rate is not the tax rate paid on the gain. Rather, it determines the portion of the capital gain included in taxable income. The actual tax payable depends on the taxpayer's circumstances.

For corporations, additional rules may apply to investment income depending on their tax status.

How Do Capital Losses Work?

Allowable capital losses incurred during the year must first be applied against taxable capital gains realized in that same year. Taxpayers cannot choose to carry these losses to another year without first applying them against their current-year gains.

If allowable capital losses exceed taxable capital gains for the year, the excess constitutes a net capital loss. This loss may be:

• Carried back three taxation years to reduce taxable capital gains reported in those years;
• Carried forward indefinitely to offset taxable capital gains in future years.

Ordinary capital losses cannot be used to reduce employment income or business income. [4]

Superficial Losses and Transactions Between Affiliated Persons

A capital loss is not always immediately deductible.

The superficial loss rules may apply when a taxpayer or a person affiliated with the taxpayer acquires the same property, or an identical property, within 30 days before or after its disposition, and the replacement property is still owned, or the right to acquire it still exists, 30 days after the disposition.

These rules may apply, for example, when crypto assets are sold at a loss and repurchased shortly afterward. [6]

For individuals, a denied superficial loss may be added to the ACB of the replacement property when the applicable conditions are met.

For corporations, certain dispositions involving affiliated persons are instead subject to specific loss suspension rules. The treatment therefore depends on the nature of the transaction and the parties involved.

How to Report Capital Gains and Losses Federally and in Quebec

Capital gains and losses must be reported for the taxation year in which the disposition occurs. Although the calculation principles are similar for individuals and corporations, the required tax forms differ.

The instructions below refer to the forms for the 2025 taxation year. Line numbers may change in subsequent years.

For Individuals

Federal Income Tax Return

Individuals report dispositions of crypto assets held as capital property on Schedule 3 — Capital Gains (or Losses) of their T1 income tax return.

For the 2025 taxation year, crypto asset transactions are reported in Section 7 of Part 3.

The relevant lines include:

• Line 15200: Total proceeds of disposition of crypto assets;
• Line 15301: Total capital gains or losses from these dispositions;
• Line 12700 of the T1 return: Taxable capital gains calculated using Schedule 3.

Capital gains and losses must be reported in Canadian dollars. [7]

Quebec Income Tax Return

Individuals use Form TP-21.4.39 — Cryptoasset Return to calculate capital gains and losses arising from crypto asset transactions.

For the 2025 taxation year:

1. Capital gains and losses are calculated in Part 4.1 of Form TP-21.4.39.
2. The amount on line 49 is transferred to line 21 of Schedule G.
3. The taxable capital gain calculated on Schedule G is included on line 139 of the Quebec TP-1 income tax return.

Form TP-21.4.39 must be filed with the Quebec income tax return. [8] [9]

For Corporations

Federal Corporate Income Tax Return

Corporations report capital gains and losses on their T2 corporate income tax return.

The main schedules include:

• Schedule 6 — Summary of Dispositions of Capital Property: Reports dispositions and calculates capital gains and losses;
• Schedule 1 — Net Income (Loss) for Income Tax Purposes: Reconciles accounting net income with net income for tax purposes;
• Schedule 4 — Corporation Loss Continuity and Application: Tracks and applies losses from other taxation years.

The schedules required depend on the corporation's circumstances and the transactions undertaken. [10]

Quebec Corporate Income Tax Return

Corporations required to file a CO-17 return must also report capital gains and losses arising from crypto asset transactions.

For the 2025 taxation year:

1. Capital gains and losses are calculated in Part 4.1 of Form TP-21.4.39.
2. The amount on line 49 is used to complete Schedule CO-17S.232 — Disposition of Capital Property.
3. The corporation's taxable capital gains, calculated for the year, are reported on line 40 of Form CO-17.A.1 — Net Fiscal Income.

Corporations must also include Form TP-21.4.39 with their CO-17 return.

Tracking and applying losses from other taxation years may require Schedule CO-17S.4 — Losses or Form CO-1012 — Application by a Corporation to Carry Back a Loss. [8] [11]

Quebec Reporting Requirements Even Without Realized Gains

In Quebec, Form TP-21.4.39 is not limited to calculating capital gains and losses. It is also used to report the ownership of and certain activities involving crypto assets.

Filing this form is required in certain situations where a taxpayer owned, received, or disposed of crypto assets during the year, even if no capital gain or loss was realized.

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.

This reporting obligation is separate from the requirement to calculate and report capital gains and losses realized during the year. [8] [11]

What Records Should You Keep?

Calculating capital gains and losses requires a complete history of crypto asset acquisitions and dispositions. This history may extend over several years, particularly when crypto assets acquired in previous taxation years are still held.

Records should include:

• Transaction dates and times;
• Quantities and types of crypto assets exchanged;
• Values in Canadian dollars at the time of each transaction and, where applicable, in the corporation’s elected functional currency; [13]
• Acquisition fees and selling expenses;
• Wallet addresses and statements from the exchanges used;
• Exchange rates and pricing sources used in the calculations.

Transfers between wallets belonging to the same taxpayer should also be documented to distinguish them from dispositions and ensure continuity of the ACB.

For corporations, crypto asset records should be reconcilable with accounting records and the amounts reported on tax returns. [12]

Need Help Calculating and Reporting Your Capital Gains and Losses?

Reconstructing the adjusted cost base and calculating capital gains and losses can become complex when transactions span several years, involve multiple exchanges or wallets, or include DeFi protocols.

Token Expert helps individuals and corporations reconstruct their crypto transaction histories, calculate capital gains and losses, and prepare the information required for their tax returns.

Contact our team to discuss your situation.

References

1. Canada Revenue Agency. Reporting income from crypto-asset transactions.

2. Canada Revenue Agency. Technical Interpretation 2023-0973071I7 — DeFi deposit and rewards, March 20, 2024.

3. Canada Revenue Agency. Determining the value of crypto-assets for tax filing.

4. Canada Revenue Agency. T4037 — Capital Gains.

5. Department of Finance Canada. Report on Federal Tax Expenditures 2026 — Part 2.

6. Canada Revenue Agency. Capital losses and deductions.

7. Canada Revenue Agency. Completing Schedule 3.

8. Revenu Québec. TP-21.4.39 — Cryptoasset Return.

9. Revenu Québec. Line 139 — Taxable Capital Gains.

10. Canada Revenue Agency. T2SCH6 — Summary of Dispositions of Capital Property.

11. Revenu Québec. CO-17.G — Guide to the Corporation Income Tax Return.

12. Canada Revenue Agency. Keeping books and records of crypto-assets for tax filing.

13. Canada Revenue Agency. Income Tax Folio S5-F4-C1 — Income Tax Reporting Currency. Paragraphs 1.8, 1.10 and 1.18–1.19.

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.