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How Bitcoins Might Influence Your Income Taxes, 2018 TurboTax® Canada Tips

How Bitcoins Might Impact Your Income Taxes, 2018 TurboTax® Canada Tips

Bitcoin is a relatively fresh e-currency payment system that is not operated by a centralized government authority like most other currencies. Popular for online payments and transfers due to its built-in encryption and security methods, Bitcoin has captured the attention of many non-traditionalists and tech-minded people. It has also captured the attention of the Canada Revenue Agency, who has altered existing tax codes to help address profits and transactions associated with virtual currencies.

Trade and Barter Transactions With Virtual Currencies

Transactions made with bitcoins or other virtual currency are covered by the section of the tax code that governs barter and trade transactions. Under this portion of the tax code, you vereiste proclaim any income received or expenses made, regardless of whether any actual contant wasgoed tied to the transaction.

For example, if you run a daycare and you accept eggs, bitcoins or any other type of trade ter exchange for child care, you still are required to report thesis transactions on your income taxes. Since you can’t proclaim bitcoins, eggs or other material items on your tax form, you voorwaarde proclaim the typical dollar amount that you would have otherwise claimed for those services.

If you usually charge $200 vanaf week for daycare services, you voorwaarde announce $200 spil income on your terugwedstrijd — even if you accepted different types of payment. Similarly, the person who provided you with the trade may proclaim the $200 spil an expense on their income tax comeback.

Using Virtual Currency for Your Business

Ter some cases, regular trade and barter rules do not apply. However, if you use Bitcoin or other virtual currency systems ter the operation of your business or self-employment activities, you are still responsible for claiming thesis purchases and payments spil usual on your tax terugwedstrijd.

To assign dollar amounts for thesis transactions, you voorwaarde use the exchange rate inbetween the virtual currency and the Canadian dollar on the day of the transaction.

For example, if you purchased inventory for your shop with Bitcoin and the cost wasgoed three bitcoins, you need to find the exchange rate for the day the purchase wasgoed made. If the exchange rate wasgoed $316 for one Bitcoin, your deduction for that inventory purchase would be $948.

Similarly, if you paid an employee using Bitcoin, you would have to convert the payment to Canadian dollars using the exchange rate from the day the payment wasgoed made. Your employee would have to use the exchange rate to determine how much income to announce.

Determining Capital Gains From Virtual Currencies

If you buy, hold and sell virtual currency, and make a profit ter the process, you vereiste voorwaarde that profit spil a capital gains. The portion of the Canada Revenue Agency’s tax code regarding securities exchanges applies to thesis transactions.

For example, if you purchased 200 bitcoins for $50,000, but sold them six months zometeen for $62,400, you would have to announce a capital build up of $12,400.

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