How to Cash Out Crypto Legally Without Paying Taxes in Canada: A Complete Guide

Last updated: 12/09/2025 18:11

Today, cryptocurrency is the trendsetter in the investment market due to its growing popularity and high rate of growth. It cannot be denied that it has become one of the hottest topics of this world, and Canada is not an exception.

Nevertheless, it is easy to exchange cryptocurrency into Canadian dollars (or other fiat currencies), yet Canadian residents should remember they must take care to ensure they are acting legally due to tax obligations under the rules of the Canada Revenue Agency (CRA). It is not as simple as “cashing out and forgetting” because the CRA treats many crypto transactions as taxable events.

Fortunately, there are some legally compliant strategies and good practices that can assist the Canadian crypto traders to avoid taxes or completely unnecessary liability without breaking the law. If you are interested, keep reading to learn the practical guide for how can “cash out” crypto — or otherwise convert/transact — without or with the least possible tax burden, while respecting CRA regulations.

Table of Contents

Crypto Tax Canada: A Brief Overview
Why Tax Matters In Canadians’ Crypto Trading?
Best Ways to Cash Out Crypto Legally Without Paying Taxes in Canada
Where to Buy Cryptocurrencies in Canada?
Conclusion
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Crypto Tax Canada: A Brief Overview

In terms of CRA’s position on cryptocurrency, they believe that cryptocurrency should be treated as a commodity, not currency, and every crypto transaction is a taxable event that must be reported, whether it results in business income or capital gains.

This means that you trigger a taxable event when you dispose of your cryptocurrency, whether by selling or trading it, giving it as a gift, converting it into government-issued currency such as Canadian dollars, or using it to purchase goods or services. If the transaction results in a gain (i.e. the sale price is greater than your cost basis), that gain is taxable.

Transacting in crypto can face either capital gains tax, typically applicable to occasional investors, or business income tax, for those conducting crypto business activities. The tax you pay depends on whether your activity is classified as capital gains (50% taxable) or business income (100%). Foreign holdings and GST/HST also may apply. Below is a summary table:

Scenario	Tax Type	Reporting Form	Taxable %
Occasional trades, long-term hold	Capital gains	Schedule 3	50%
Frequent trading, mining, staking	Business income	Form T2125	100%
Gift, barter, crypto purchases	Capital gain/income	Schedule 3 / Form T2125	50% /100%
Crypto holdings > CAD 100k overseas	Foreign asset report	Form T1135	n/a

Notably, if you did not report your income or capital gains from cryptocurrency transactions, you may have to pay tax, penalties, and interest on that income or capital gain.

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Why Tax Matters In Canadians’ Crypto Trading?

Canadian crypto traders must to know understand crypto taxation as the Canada Revenue Agency (CRA) treats crypto as a commodity, not currency. Compliance with tax laws is highly valued in Canada because CRA has intensified its monitoring of the digital asset activity to a considerable level.

In the last years, the CRA has forced large crypto exchanges to disclose user data and has initiated strict audits of persons with high or excessive volumes of crypto transactions. This means that the notion that crypto trading is anonymous or untraceable is inaccurate. Canadian traders who neglect their taxes may risk paying interest or being prosecuted in the courts not to mention paying back taxes.

Besides, crypto taxes would enable investors to make optimal choices regarding their finances. Through the knowledge of gains and losses calculation, traders will be able to strategically plan dispositions, offset losses, and possibly minimize their taxable income.

If you’re a crypto-asset user in Canada, knowing whether your transactions resulted in a capital gain (or loss) or in business income (or loss) is important because it may affect your taxes. To ensure correct reporting, it is highly recommended to keep accurate records of your purchases and sales dealing with cryptocurrency, including records that show how you calculated the fair market value.

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Best Ways to Cash Out Crypto Legally Without Paying Taxes in Canada

Want to know how to cash out crypto without paying taxes in Canada? At the beginning, it is important to admit that it’s not possible to legally cash out crypto without paying tax in Canada. However, there are some strategies to legally reduce your tax bill without getting on the wrong side of the CRA. Below sets forth seven useful ways to reduce your tax on crypto in Canada.

Holding Crypto as a Long-term Investment Rather than Trading Frequently

The simplest way to avoid paying tax on your cryptocurrency is HODL. If you don’t dispose of your cryptocurrency (by selling, trading, spending or gifting it), there is no taxable event.

Assuming your crypto dealings are infrequent and you hold assets for months or years before selling them, your profits will likely qualify as capital gains, meaning only 50% of the profit will be included as taxable income.

Invest in a Crypto ETF

An exchange-traded fund (ETF) is a type of investment that tracks the performance and price of a financial asset, such as Bitcoin.

You don’t actually own the cryptocurrency itself in an ETF. Instead, you speculate on the price and subsequent gains (or losses). ETFs are appealing to investors who would like to invest in cryptos like Bitcoin in the long term without the hassle of storing and securing them.

Please note that, while Canadian crypto ETFs are a good option for some investors, some ETFs carry high management fees.

Invest in Registered Retirement Savings Plan (RRSP)

The RRSP is another tax-advantaged account that enables individuals to save for retirement while reducing their current tax liability. Any time you contribute to an RRSP, you can claim a tax deduction for that contribution, letting you reduce your tax bill. Contributions to an RRSP are tax-deductible, and the investments within the RRSP grow tax-deferred until withdrawal. However, there is a limit as to how much you can contribute each year.

Contributions: The annual RRSP contribution limit is determined based on an individual’s earned income from the previous year, up to a maximum limit. For the 2023 tax year, the RRSP contribution limit is whichever is lower: 18% of the individual’s earned income in the previous year or $30,780.
Withdrawals: Withdrawals from an RRSP are considered taxable income and are subject to income tax. However, individuals may have a lower tax rate in retirement, making RRSP withdrawals more tax-efficient.

Take Advantage of Tax Deductions and Credits

In Canada, individuals can use capital losses from crypto transactions to offset capital gains from other sources such as stocks or real estate, but cannot offset against income from other sources, such as employment income.

For example, if you made a $500 profit from selling ETH and a $500 loss from selling BTC, these would cancel each other out. This strategy can help to reduce your overall tax liability for the year. The 50% rule for capital gains also applies to capital losses. This means that an individual can only offset half of their net capital loss in a given tax year.

However, if you have more losses than gains, you can carry losses forward to future tax years. These can be carried forward indefinitely until the losses are utilised. It is important to note that capital losses can be offset against gains from the three preceding tax years or carried forward to offset gains in future years.

Donate Crypto to Charity

As the CRA classifies crypto as a commodity rather than currency, donating crypto is subject to different tax treatment compared to cash donations. While donating crypto can offer tax benefits, the rules are complicated.

When you donate cryptocurrency, the CRA views this as the disposal of an asset, which has tax consequences. If the value of your crypto has increased from the time of acquisition until the time of donation, you will be liable for capital gains tax on that donation. Donating crypto to a registered charity is considered a gift in kind, which is subject to the deemed fair market value rule.

When you donate, you must inform the charity of the date on which you acquired your crypto asset. If you received and donated it within three years of the acquisition date, the charity may only issue a tax receipt for the obtained value, which would be the amount that is potentially tax-deductible.

Act as an Individual Investor

The way investors with capital gains vs. business income are taxed differs significantly.The CRA makes it clear that cryptocurrency is subject to either income tax or capital gains tax, depending on whether you are conducting business-like activities or acting as an individual investor.

Individual investors generally only pay tax on half of any capital gain (except those with gains in excess of $250,000 annually from 2026 onwards). Meanwhile, business income is taxed on the full amount of any profits.

As there are no clear rules on how to avoid this and the CRA decides on a case-by-case basis, avoiding regular, repetitive investment activities with short-term gains is a good place to start.

Keep Crypto Trading Records Carefully

Compliance with crypto tax regulations is critical to avoid potential penalties and audits by the CRA. Make sure you keep records of when you acquire, dispose of, or swap crypto-assets so that you have accurate information about your activities. If you use third-party software or exchanges for your crypto-asset transactions, make sure you regularly download your original data.

You should keep records of the following information for your crypto-asset transactions:

The number of units and type of crypto-asset for each transaction;
The date and time of each transaction;
The value of the crypto-asset (in Canadian dollars) at the time of each transaction;
A description of the nature of each transaction and the other party to the transaction (even if it is just their crypto-asset address);
The addresses associated with each digital wallet used;
The beginning wallet balance (and its cost) and ending wallet balance for each crypto-asset for each year.

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Where to Buy Cryptocurrencies in Canada?

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Conclusion

In Canada, “cashing out” crypto inevitably triggers tax obligations under CRA rules. Fortunately, there are legal strategies that can help to reduce your tax bill, including holding crypto as a long-term investment, investing in an RRSP or crypto ETFs, and making deductible donations.

It is crucial to comply with crypto tax regulations to avoid potential penalties and audits by the CRA. Therefore, all stakeholders are strongly recommended to stay informed about the latest regulatory developments and compliance requirements regarding crypto tax. This will enable them to navigate the market more responsibly and contribute to the long-term sustainable growth of the Canadian cryptocurrency ecosystem.

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