If you’ve ever bought or sold cryptocurrency then you’ll need to disclose that information on your tax return. The problem is that cryptocurrency taxes can be confusing depending on the nature of your crypto activities. Staking is considered income, yet selling crypto could incur a capital gain.
It is beneficial to use crypto tax software to help you file your crypto taxes and to make sure you’re paying the right amount of tax each year. TurboTax is a software that Canadians can use to file their taxes for free. While TurboTax is a good tax software that can help you easily file simple taxes, it is not the best for crypto taxes in Canada.
Crypto taxes are complicated and the more transactions you have the harder it is to keep track and calculate everything correctly. Unfortunately, TurboTax doesn’t have the necessary features to help you file crypto taxes easily.
TurboTax does not have a native import feature, meaning you cannot connect your crypto wallets or import your transactions from crypto exchanges. This means you will have to use additional software to gather all of the required information.
If you do not trade crypto often, or you stake only one crypto then you may be able to easily keep note of your crypto transactions and income yourself. It’s often a good idea to keep a record of your crypto trading anyway, just in case the Canada Revenue Agency ever wants to see it.
If you use TurboTax to file your crypto taxes in Canada, then it is recommended to also use a crypto tax software to help you calculate your crypto income and capital gains. We recommend Koinly.
Koinly is a crypto tax software that crypto traders use worldwide. Unlike TurboTax, Koinly lets you import all of your crypto transactions from wallets and exchanges. It is easy to use and with a few clicks, Koinly will calculate your capital gains and add up all of your crypto income. You can check our Koinly review here.
You can simply search for your crypto exchange or wallet and import your transactions directly. You can import from as many exchanges or wallets as you need.
Koinly will calculate profits and losses based on the prices of the cryptocurrencies at the time in which you bought and sold them. The software does this automatically and you will be able to see all of this and adjust anything that is incorrect under “transactions”.
Koinly will also label transactions such as “reward” “transfer” or “income” but you can relabel anything if it’s not correct. Anytime you do, Koinly will readjust its calculations automatically.
Koinly is free to use but to generate reports such as capital gains or income reports, you will need to select one of the paid accounts depending on your needs. We think the price of Koinly is worth it to save you the headache of calculating everything yourself.
Once you have used Koinly to generate your various crypto reports, you can view them or download them to your computer. You will need these reports to help you input the correct figures into TurboTax.
For example, in the capital gains section of TurboTax, for “Adjusted cost base” copy and paste the “Acquisition costs” figure from the capital gains section of your Full Tax Report from Koinly.
In the income section in TurboTax where it asks for “interest and other investment income” enter the “total” figure from the income section of your Full Tax Report that you get from Koinly.
The fewer crypto transitions you have the less complicated your crypto taxes will be. However, if you’re unsure about anything at all then it is best to contact a tax professional. Koinly does, however, have many useful articles and guides on its website to help you understand the various aspects of crypto taxes.
Whether you use TurboTax to file your crypto taxes in Canada or another tax software, we recommend using Koinly to easily calculate all of your crypto income and capital gains.