Look, I get it. The last twelve months in the crypto market have been wild. If you are sitting in your condo in King West or a townhouse in the Beaches, looking at your portfolio, you are probably feeling pretty good. You might have caught the Solana pump, or maybe you finally cashed out some Bitcoin you bought back in 2019.
But then, the dread sets in.
It usually hits around February. You realize that the Canada Revenue Agency, or CRA, knows about your coins. You realize that decentralized does not mean invisible. And you realize that if you mess this up, the penalties could wipe out a chunk of those gains you spent all night staring at charts to get.
I have been a tax accountant in Toronto for a long time. I have seen the CRA go from asking what Bitcoin is to using sophisticated chain-analysis software to track transactions.
If you are looking for a crypto tax accountant in Toronto, it is probably because you suspect that TurboTax or a generic tax clinic is not going to cut it this year. And you are right. With the new capital gains inclusion rate changes and the aggressive audit teams at the CRA, 2026 is not the year to guess.
Here is everything you need to know to survive tax season without triggering an audit.
The Business Income Trap (The Number One Risk)
This is the conversation I have with almost every new client who walks into my office.
Client: I just hold crypto, so I only pay capital gains tax, right? Me: How many trades did you make last month? Client: About 400.
Here is the cold, hard truth. The CRA does not care what you call yourself. They care about how you act.
In Canada, we have two buckets for crypto profits.
First, there are Capital Gains. Only 50% (or 66.67%, and we will get to that) of your profit is taxed. This is for investors who buy and hold.
Second, there is Business Income. 100% of your profit is taxed. This is for people carrying on a business.
If you are working a tech job in Liberty Village and trading crypto on your phone all day, the CRA might decide you are running a trading business. If they do, your tax bill effectively doubles.
They look at the frequency of trades, your specialized knowledge, and time spent. If you are using trading bots or high-frequency strategies, you are almost certainly generating business income. A good tax advice Toronto specialist can help you argue your case for Capital Gains, but you need the documentation to back it up.
The New Rules: Capital Gains Inclusion Rate (The 2025/2026 Shift)
This is the big one. This is the change that had every tax consultant in Toronto working overtime when the federal budget dropped.
For years, the inclusion rate was 50%. If you made $100,000 in profit, you paid tax on $50,000. Simple.
But the rules have changed. Now, if you are an individual and your capital gains exceed $250,000 in a single year, the inclusion rate on the excess jumps to 66.67%. That is two-thirds.
A Toronto Example
Let’s say you bought early and sold a significant chunk of ETH this year, profiting $500,000.
For the first $250,000, you are taxed at the 50% inclusion rate. You pay tax on $125,000.
For the remaining $250,000, you are taxed at the 66.67% inclusion rate. You pay tax on roughly $166,000.
That might not sound like a huge difference on paper, but when you add the Ontario provincial tax rate, which is one of the highest in North America, you are handing over a massive cheque.
If you are incorporating or trading through a company, it is even worse. The 66.67% rate applies from the first dollar. There is no $250,000 buffer. This is why you need specific tax advice downtown Toronto because generic advice from the internet often misses these provincial nuances.
Why Crypto Tax Software Is Not Enough
I know what you are thinking. I will just use Koinly or CoinLedger. It connects to my API, it spits out a number, I am done.
Software is great. I use it too. But software is a calculator, not an accountant. It follows rules, but it does not understand context, and it breaks constantly.
The Adjusted Cost Base (ACB) Nightmare
Canada uses a weighted average cost basis (ACB). Most software defaults to First-In, First-Out because that is how the US does it. If you do not toggle that setting, your entire tax return is wrong.
Furthermore, if you transfer Bitcoin from your Ledger to Kraken, the software often reads that as a sale and a buy, triggering a taxable event where there was not one. You have to manually tag these as transfers. If you miss one, you might pay tax on money you still have.
The Superficial Loss Rule
This is the one that gets people audited.
If you sell a coin at a loss to lower your taxes (tax loss harvesting) but you, or your spouse, or your corporation buy it back within 30 days, the CRA denies that loss.
Software often misses this. It sees the sale and gives you the tax credit. You file your return. The CRA computer matches the buy and sell dates, sees the violation, and auto-flags you for a review. Now they are not just looking at that one trade. They are looking at everything.
The T1135 Nightmare (Foreign Reporting)
If you take nothing else from this article, remember this: Form T1135.
If you hold specified foreign property with a total cost of over $100,000 CAD at any time during the year, you must file this form.
Does crypto count?
Yes. The CRA has stated that cryptocurrency held on a foreign exchange like Binance, Coinbase, or Kraken is considered foreign property.
If you keep your crypto on a cold wallet like a Trezor in your sock drawer in Toronto, it might be considered Canadian property, though this is still a grey area legal experts argue about. But if it is on an exchange based outside Canada, it is foreign.
The Penalty
If you miss this form, the penalty is $25 per day, up to $2,500 per year, plus interest. And that is just for being late. If you knowingly hide it, it gets much worse.
I have had clients come to me with three years of unfiled T1135s. That is $7,500 in automatic penalties before we even calculate the tax. A skilled crypto tax accountant in Toronto can sometimes use the Voluntary Disclosure Program (VDP) to waive these penalties, but you have to come forward before the CRA contacts you.
Toronto Specifics: Living High, Taxed Higher
Living in Toronto is expensive. We all know that. But from a tax perspective, Ontario is aggressive.
Our top marginal tax rate is over 53%. That means for every dollar of business income, or interest from staking, you earn in the top bracket, you keep less than 47 cents.
This is why structure matters.
If you are a serious trader, simply filing as a sole proprietor is tax suicide. We often look at three things.
First is Incorporation. Moving your trading activity into a corporation to defer tax and pay the lower corporate rate initially.
Second is Section 85 Rollovers. A complex but powerful way to move your crypto into a corporation without triggering a tax event immediately.
Third is TFSA Strategy. You cannot hold crypto directly in a TFSA Toronto account. If you day trade crypto stocks like miners or ETFs inside your TFSA, the CRA can tax your entire TFSA as business income. I have seen them do it. Do not risk your tax-free room for a quick flip.
What to Look for in a Toronto Crypto Accountant
Not all accountants are created equal. I have seen tax returns prepared by old school firms where they listed Bitcoin as Foreign Currency. That is wrong. Bitcoin is a commodity, subject to barter rules.
When you are interviewing tax consultants Toronto, ask them these three questions.
How do you handle DeFi staking rewards?
If they hesitate, run. Staking rewards are usually considered income at the time of receipt, based on the value that day, and then capital gains or losses when you eventually sell the coin. It is two layers of tax events.
Do you use the Voluntary Disclosure Program?
If you have unreported crypto from 2021 or 2022, you need an accountant who knows how to negotiate with the CRA to fix it without triggering criminal prosecution.
How do you calculate ACB across multiple wallets?
They should explain that ACB is calculated on the entire pool of that coin you own, not wallet by wallet.
FAQ
Can the CRA really track my crypto? Yes. The CRA has successfully won court orders against major exchanges like Coinsquare and others to hand over user data including names, addresses, and transaction history. If you did KYC on a Canadian on-ramp, the CRA likely has your data.
Is there any way to save Toronto tax on crypto? Legal ways? Yes. We can look at tax-loss harvesting, which means selling losers to offset winners before year-end. We can look at donating crypto to charity, which eliminates the capital gains tax on the donated amount. We can look at incorporation. Illegal ways? Don’t ask me. The blockchain is a permanent public ledger. Tax evasion on a public ledger is a terrible idea.
I only lost money this year. Do I still need to file? Absolutely. You want to report those losses. Those losses can be carried back three years to get a refund on taxes you paid previously, or carried forward indefinitely to offset future gains. Do not throw away your tax credits.
Do I need a local downtown Toronto accountant? In the age of Zoom, maybe not. But there is value in someone who understands the Ontario specific credits, the local cost of living audits, and who can sit down with you and look you in the eye when things get complicated.
Final Thoughts
The 2026 tax season is going to be brutal for the unprepared. The combination of the new inclusion rate, CARF data sharing, and a government hungry for revenue means crypto investors are a target.
Do not rely on a subreddit for advice toronto tax planning. Get a professional who knows the code, knows the coin, and knows how to protect your wealth.