Managing crypto taxes in Canada can feel daunting, especially when your portfolio dips in value. Thankfully, Canadian cryptocurrency tax laws can actually help you reduce what you owe if you’re strategic about your losses. Below, we outline the core rules for claiming, tracking, and reporting these losses.

How is crypto taxed in Canada?

In Canada, digital assets are viewed as property. Gains can be classified as either capital gains or business income, depending on your overall trading habits. If you’re seeking a deeper dive on everything from capital gains rates to potential business income classifications, read our Guide to Crypto Taxes in Canada. Understanding these fundamentals lays the groundwork for how you’ll handle any losses.

Calculate your crypto gains with our free crypto profit calculator.

Do you have to report crypto losses to the CRA?

Yes. Even if you lost money this year, you still need to note your transactions. Reporting your losses can help you offset future capital gains and, in some cases, reduce your overall tax burden. The CRA requires that all dispositions of digital currency (such as selling or swapping one token for another )be included on your return.

Can crypto losses reduce my tax bill?

The short answer is yes. Under Canada’s crypto tax rules, you can apply allowable capital losses to offset your capital gains, including those on crypto or other investments like stocks. If you end up with more losses than gains this year, you can carry the remainder forward or back to offset gains in other tax years. Do note that these losses won’t reduce your regular (non-capital) income.

What are some alternative ways to reduce my crypto tax bill in Canada?

Alongside harvesting losses, there are a few strategies you can consider:

• Plan your disposals: Realizing gains in low-income years can lower your tax rate.

• Consider TFSAs or RRSPs: Some exchange-traded funds (ETFs) track Bitcoin or Ethereum. Holding them within tax-advantaged accounts can offer relief.

• Explore lending or borrowing: Instead of cashing out tokens (and triggering a capital gain) you might use them as collateral for a loan, which typically isn’t taxed the same way.

Remember to weigh the pros and cons carefully, as each approach depends on your personal financial circumstances and the current crypto market.

The Superficial loss rule explained

Sometimes called the “wash sale rule” in other jurisdictions, this guideline in Canada prevents you from claiming a loss if you repurchase the same asset within 30 days before or after selling it. Basically, if you sell crypto at a loss and jump back in right away, the CRA may disallow the loss for that transaction.

What is the deadline for tax-loss selling in Canada?

While you will file your taxes by April 30, it is best to finalize any crypto loss sales by December 31 to offset gains within the same tax year. Waiting past that date could push any benefits to the following year. Keep an eye on settlement times and trading deadlines to ensure your loss is recognized when you intend.

Use our free crypto tax calculator.

Reporting your crypto losses on your tax return

When it’s time to file, you’ll typically use Schedule 3 to report both gains and losses from digital assets, shares, and similar investments. If your net capital losses this year exceed your gains, you can carry them back up to three years or carry them forward indefinitely. You’d do this using Form T1A. The main idea is to ensure you consistently and accurately document each transaction, including the date, proceeds, and cost basis.

Tracking capital gains and losses in Canada

Knowing your adjusted cost base (ACB) is essential for determining whether you incurred a gain or a loss. Keep a record of:

1. Purchase price (including fees)

2. Sale price or exchange value

3. Any related expenses (like commissions)

If you traded multiple times across different exchanges, it can get tricky. Good record-keeping is the backbone of staying compliant under Canadian cryptocurrency tax rules.

See our expert picks of the best crypto wallets.

Steps to report crypto losses on your taxes

1. Gather every transaction: List all crypto disposals—sales, trades, or uses for purchases—throughout the tax year.

2. Calculate gains or losses: Subtract your cost base from your proceeds for each trade. If negative, that’s a capital loss.

3. Apply superficial loss checks: Make sure you didn’t reacquire the same asset too soon, or your loss might not qualify.

4. Use Schedule 3: Tally up gains and losses. If losses exceed gains, determine how much you can carry forward or back.

5. File your return: Submit your T1 before the CRA deadline (usually April 30), and keep backup documentation in case you need to verify your calculations.