Taxes are part of life and if you don’t accurately report your income, the Canada Revenue Agency (CRA) may fine you (or worse). Keep in mind that CRA can track cryptocurrency in some cases. While it may seem daunting to report crypto taxes, it’s extremely important to declare taxes on cryptocurrency gains when filing your tax return. In this article, we will show you how to use a crypto tax calculator to make your life a little bit easier when you report cryptocurrency on taxes.
When it comes to crypto taxes reporting in Canada, you need to make sure you understand what counts as income and what counts as capital gains.
If you simply buy and hold crypto then you do not need to report this on your taxes.
If you stake crypto (read here our guide on crypto staking for Canadians), receive rebases, or lend stablecoins, then anything you receive in return counts as income. You will need to total the amount up and add it to your total income for the year.
If you trade one crypto for another, this can incur a capital gain. If you sell crypto for fiat, this can also incur a capital gain depending on if the value went up between the time you bought and sold.
For more information on what is deemed taxable in Canada, see our ultimate crypto tax guide for Canadians.
Using Koinly to Report Crypto Taxes In Canada
Koinly is a free-to-use crypto tax calculator that can help you file your crypto taxes in Canada. Koinly is compatible with Canada’s tax laws and regulations and if you have a paid plan, you can print tax reports including an income report, capital gains report, and a buy/sell report. Koinly is also compatible with many other countries including the UK and USA.
Koinly can automatically detect your crypto income and capital gains and calculate a total for you which you can report on your tax return. It’s easy to use, fast, and makes reporting crypto taxes much more simple.
Step 1 – Sign up
In order to use Koinly, you first need to sign up for an account on the Canadian page with your name and email address.
After that, you can start adding all of the crypto exchanges and wallets that you have used. Koinly needs to have access to all of your information so it can accurately report your crypto income and capital gains.
For example, if you bought bitcoin in 2017 and sold bitcoin in 2021, Koinly will need to have access to both the 2017 and 2021 transactions. If Koinly only has access to the 2021 transaction, it will assume your cost basis – the price you bought bitcoin – was zero. This will result in a higher capital gains tax liability. Therefore, you must give Koinly all of your crypto transaction history so the software can accurately calculate your liability.
Step 2 – Add Exchanges
To add the crypto exchanges and wallets you have used, click “wallets”. Then, select or search for your crypto exchange. Koinly supports hundreds of exchanges and wallets including the most popular among Canadians like BitBuy, Coinberry, Shakepay, Newton, and more.
Say you have traded cryptocurrency on Binance. Select Binance and then you will be given a choice to either import your transaction history via a file or automatically via an API key.
If you choose the API key option, you can find this key in your Binance account by going to your profile and “API Management”. Here, you can generate an API key and API Secret for your account. Paste this into Koinly. Other crypto exchanges will also allow you to generate an API key for use with Koinly.
In some cases, only six months of your transaction history will be imported when you select this method. To get your full transaction history you can import a spreadsheet. Go to your crypto exchange and in your account dashboard there should be an option to export your transaction history. Upload this file into Koinly.
You can also import transactions from your hardware crypto wallets and soft wallets, simply by uploading your transaction history file. You can find your transaction history in Ledger Live.
Step 3 – Review Transactions
Once your transactions have been uploaded, visit the “transactions” page. Here, you will see all of the transactions you have made in 2021 and beyond. It is important to go through each and every transaction to make sure they are correct as sometimes Koinly can get things wrong.
Koinly will automatically detect staking rewards and label them “rewards”. All rewards count as income and Koinly will add them all up for you.
If you have a crypto Visa card, Koinly will automatically detect your cashback and label them as “deposits”. Since cashback and deposits are not taxed, you do not need to make any changes here.
If you have bought and sold crypto or traded one crypto for another, Koinly will automatically detect these transactions and label them appropriately.
If you have a capital gain or loss, Koinly will show the amount in either green or red.
Koinly is not 100% accurate and that’s why you must check your transaction history and edit any that are wrong. You can do this by clicking on the three dots next to a transaction. If the value for a token is missing, you can manually enter it.
If Koinly gives an error that it’s missing purchase history, this means that Koinly has one half of a transaction but not the other. For example, it may be that Koinly can see where you have sold a crypto but can’t see where you bought it in the first place. Make sure you have added every exchange you’ve ever used so that Koinly can see all transactions.
In some cases, Koinly may not know about fees you have paid. If you pay Ethereum gas fees, the transaction may appear labelled as “sent” but you can edit this and change the label to “cost”. Costs are tax deductible, so it’s worth your time to go through the transactions and ensure everything is correct.
Step 4 – View Tax reports
Once you have checked through your transactions, you can visit the “tax reports” page. Here, you can see a breakdown of your crypto income and costs.
If you use the free version of Koinly, you won’t be able to see your capital gains for the year, nor will you be able to download any tax reports.
Koinly can be a big help when you have to report cryptocurrency on taxes in Canada. If you simply buy and hold crypto, you won’t need to report anything, but as soon as you trade, sell or stake crypto, then it becomes much harder to track. Using a crypto tax calculator like Koinly can save you a lot of time and hassle. We have been using Koinly for a few years now and recommend it to anyone looking to declare crypto gains on their taxes.