The character call: half in, or all in
Canadian law has no holding-period test for crypto. Whether gains are capital or business income turns on the whole pattern: how often you trade, how long positions are held, how much time and study the activity absorbs, whether borrowed money is involved, and what your history says you intended. A handful of long holds reads as investing. Hundreds of short-cycle trades on leverage, run with daily screen time, read as an adventure in the nature of trade, which is business income.
The two answers file differently, and the difference is the tax base itself. Capital gains land on Schedule 3 with half the gain included in income. Business income lands on Form T2125, fully included, with expenses deductible against it and losses usable against any other income. Securities traders can lock in capital treatment for Canadian securities by election under subsection 39(4); no such election exists for coins, so the facts decide and the file has to support them.
One person can also hold both at once: a long-term stack kept as capital beside an active trading book that is a business. We split the file, give each activity its own treatment, and record the reasoning in the year the position is taken, because the CRA's question arrives years later.
| Capital treatment | Business treatment | |
|---|---|---|
| Reported on | Schedule 3 of the T1 | Form T2125 |
| Amount taxed | Half the gain | The whole profit |
| Losses | Offset capital gains only, back three years or forward indefinitely | Deductible against any income |
| Pattern that fits | Fewer positions, longer holds, own money | High frequency, short cycles, leverage, hours a day |
Rewards are a third stream beside the gains, not inside them: staking and mining income from a business enters income at its value on receipt, and the bookkeeping that makes the number defensible lives in the ledger our accounting side maintains.
T1135: coins on foreign platforms can count
Form T1135 is due when the total cost of your specified foreign property passed $100,000 Canadian at any time in the year, and the CRA has taken the view that cryptocurrency can be specified foreign property. Coins sitting with a foreign exchange or custodian are the clear case. Where self-custodied coins are situated is a genuinely unsettled question, which is a reason to take the form seriously rather than assume it away.
The form is pure disclosure; no tax attaches to it. But a missed filing costs $25 a day to a maximum of $2,500, even in a year with no gains at all. We test the threshold against cost rather than market value, count what belongs, and file the form with the return instead of discovering it during a review.
Exchanges report, and the CRA already asks
The CRA does not wait for volunteers. It has gone to Federal Court to compel a major Canadian exchange to hand over client trading records, its audit letters carry a detailed cryptocurrency questionnaire, and Canada is implementing the OECD's Crypto-Asset Reporting Framework, under which trading platforms report client transaction data to tax authorities. Large fiat withdrawals to your bank account are visible today. Filing as if nobody can see the wallet is a position that ages badly.
The strong posture is boring: a return that reconciles line by line to a disposition ledger, with the character call documented before anyone asked. When a letter arrives anyway, CRA Audit & Review Support answers it from working papers rather than memory, which is the difference between a two-letter review and a two-year one.
The returns we actually prepare
Most crypto files are personal: a T1 carrying Schedule 3, a T2125 or both, prepared through Personal Tax Filing with the T1135 assessed every single year, not once. Where a corporation mines or trades, Corporate Tax Filing carries the same character questions onto the T2 at corporate rates, with the GST/HST positions that mining brings checked rather than assumed.
What we need from you is history, not a spreadsheet built at midnight before the deadline: exchange exports, wallet addresses and honest answers about the pattern. We work with investors across Mississauga and the GTA who range from ten trades a year to ten thousand, and every fee is quoted in writing after a free 15-minute discovery call.
Source: CRA — Form T1135, Foreign Income Verification Statement.
