Capital gains from cryptocurrency are realized when crypto is sold, traded, or used to purchase goods/services, calculated as the difference between the adjusted cost base (ACB) and the fair market value at disposition. Only 50% of the capital gain is included in taxable income and taxed at the individual's marginal tax rate, which combines federal rates (15% to 33%) and provincial rates (varying by province, e.g., up to 16% in Ontario), resulting in effective rates up to about 26.5% on the full gain. The CRA typically requires using the average cost method for identical cryptocurrencies, and losses can offset gains.

Income from cryptocurrency activities such as mining, staking, airdrops, or earning interest is treated as business income or investment income and is fully taxable at the individual's marginal tax rate. For example, mining rewards are valued at fair market value upon receipt and taxed as income, with related expenses deductible if it's a business. Staking rewards and hard fork coins are also considered income at the time of receipt, taxed at combined federal and provincial rates that depend on total income and province.

Taxpayers must report cryptocurrency transactions on their annual income tax return (T1 General) filed by April 30 (or June 15 for self-employed), including capital gains on Schedule 3 and income on the appropriate lines. Detailed records of transactions, including dates, values in CAD, and cost bases, must be maintained for at least six years. The CRA may require additional forms like T1135 for foreign property if holdings exceed CAD 100,000.

Cryptocurrencies are not considered legal tender in Canada, so transactions are treated as barter trades, potentially triggering tax events even without fiat conversion. Airdrops and forks are taxable as income upon receipt if they have value, and NFTs follow similar rules as crypto assets. Superficial loss rules apply to prevent claiming losses on repurchased assets within 30 days, and the CRA has been increasing audits on crypto holders using data from exchanges.