According to CRA, Canadians have to pay taxes on crypto-currency. Confused? Don't worry; we got you! Read the article, and you will get a better understanding of the situations when you have to pay taxes on personal crypto income.
How does Crypto-Currency Work?
It's a type of currency that may be used to buy and sell products and services online. When you purchase crypto currency, all of your transactions, such as selling/buying goods and services, paying bills, and investing, occur digitally rather than physically.
“Cryptography is the essential building block of independence for organizations on the Internet, just like armies are the essential building blocks of states because otherwise one state just takes over another.” – Julian Assange
What is Personal Income?
Personal income includes wages and salaries, welfare benefits and other government aid, investment income, business ownership, and other sources.
“Learning how cryptocurrency works is like learning a new language. It is incredibly difficult at the beginning, but once it clicks it will stick with you forever.” ― Olawale Daniel
Tax on Personal Crypto Income:
1. Capital gain:
Only 50% of a capital gain on personal income is taxed whether you have preserved your assets for an extended period of time; the tax would still be 50%
2. Capital Loss:
Only capital losses can offset other capital gains, not to reduce income. If you have more losses than gains, these losses can be used to offset gains from the previous three years. If your earnings are insufficient to offset your losses, you can carry them forward to offset increases in subsequent years.
3. Ordinary Income:
If you pay crypto-currency as a salary or wage to your employees, the total will be added to their taxable income under subsection 5(1) of the Income Tax Act.
4. Adjusted Cost Basis Accountings:
Any crypto taxpayer must adjust their inventory on an average cost basis.
For example: if you buy crypto at different prices, inventory will be calculated on average for tax purposes.
Calculation on average:
1 unit= $50
1 unit= $70
1 unit= $40
1 unit= $100
Sum of 4 units = $260
Average 260/4= $65 Average cost.
[Cryptourrencies] may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system. –Ben Bernanke
The Bottom Line:
You have to pay taxes on your crypto earnings, and for that, you have to know all the rules and regulations. So, you don't need to be disappointed if you are confused about the whole process; Yogi & Associates have got you! We will make sure you get a better understanding of crypto earnings and the taxes on the earnings, and we will assist you in every step to deal. You can contact us online or please visit us in Mississauga to avail our services. In addition, we will ensure that you follow all the protocols to complete your taxes to make your ways easy.