So this has come to my attention as a small business owner, how does taxation work in Canada for people who buy, hold and then cash out crypto? I’ve recently gotten into buying, holding and staking, and I own a sole proprietorship in construction. I’m familiar with the nuances of taxes for small business.
For my company, any money I spend on running the business is a deductible. This includes taxes, vehicle expenses, insurance, tools, materials etc. So one of my questions is, say you put 10 grand into say BTC, and it grows to say 10x to keep things easy for speculative reasons. When you cash out, do you pay tax on the gains minus the initial deposit, so you start with 10 g, it becomes 100 g, so you would deduct the 10 that you already paid taxes on, and so your taxable gains would be 90 g?
If this is the case, how can we reduce the amount of taxes we pay. Also, I’ve been hearing currency swaps are taxable events, which is kind of f***ed up, because we swap like crazy, I don’t know how I would keep track of all my swaps for tax reasons, it would be an astronomical task and pretty unrealistic to expect the average newbie to completely understand and execute these calculations on all their different exchange accounts without any error. It’d be a ridiculous task to try to sort out all the swapping and switching. It would make way more sense to just pay gains on when you cash out to your bank account. I’m not clear on the law regarding this stuff, and knowing Mr. Vosk does this shit full time, I’m very interested in hearing about how you manage your taxes in this, since you are full time and a lifer.
If there is a way to cash out without paying taxes, or how to pay less taxes, I’m all for it. It would be a kick in the nuts to find a jem of a source of secondary income, just to get completely f****d when you try to finally cash out and try to throw it into another sort of venture.
One option I thought about is to open a small business, and keep the crypto and fiat associated with the buisness in the buisness, and pay yourself out accordingly to keep your tax bracket low. Keep all your hardware purchase recipts, keep track of all your losses, possibly become a resident of a tax friendly region or country to cash out (if you made some crazy gains, this could be a good option). This is a pretty stressful consideration, but the sooner we get this locked down, the better off we will all be.
I’d imagine the average individual hasn’t even considered the tax implications of crypto, more or less treating it like the wild west. I’m pretty sure Canadian gambling gains aren’t taxed, which is a little off topic, but there is a lot of grey areas here. Another possible way to avoid paying taxes may be to purchase items which are stores of value or just valuable assets in themselves via spending crypto from a wallet without any KYC rules.
Something else which I would imagine will become more and more popular, is getting an accountant or lawyer, who is up to date on these details. Seeing as I’m going all out on sorting this out to stay legit, it’s a very high priority to stay out of trouble in the space. Advice on who to seek accounting assistance from is going to become a very hot topic in the next few years with the exponentially increasing adoption of crypto by the average individual.
Any collaboration and or advice on this would be very much appreciated! I feel this is very important for the community to become more aware of. If you could make a video on it (Directed at Mr. Vosk), that would be a very digestible way to discuss and or inform people about these nuances.
Stay crypto everyone! Live the dream!