Cryptocurrency Tax for Cross-Border Canadians and Americans: How Both Countries Tax Crypto

Both Canada and the US treat cryptocurrency as property, not currency. Selling, trading, or spending crypto triggers a capital gain or loss. Mining and staking create ordinary income. These rules apply regardless of whether the taxpayer lives in the country that issued the crypto exchange account, and neither country has carved out a special exemption for digital assets in the treaty. A Canadian who trades on Coinbase (a US exchange) and a US citizen who trades on a Canadian exchange face the same set of cross-border questions: which country taxes the gain, how is the foreign exchange account reported, and what happens when you move between countries with unrealized crypto gains.

How does the US tax cryptocurrency?

The IRS treats cryptocurrency as “property” under Notice 2014-21. Every disposition of crypto is a taxable event. A disposition includes selling crypto for fiat currency, trading one crypto for another (BTC for ETH is a taxable exchange), spending crypto on goods or services, and gifting crypto (the donor does not realize a gain, but the recipient takes a carryover basis).

Capital gains: If you buy BTC for $10,000 and sell it for $35,000, you have a $25,000 capital gain. If held for more than one year, the gain is long-term capital gain (taxed at 0%, 15%, or 20% depending on income). If held for one year or less, the gain is short-term and taxed at ordinary income rates (up to 37%).

Mining income: Crypto received from mining is ordinary income, valued at the fair market value on the date of receipt (IRC 61). The miner includes the FMV in gross income and takes a cost basis equal to the amount included. If the miner later sells the crypto, the gain or loss is measured from the mining-date FMV.

Staking rewards: Similar to mining. Staking rewards are ordinary income when received, valued at FMV on the date of receipt. The IRS confirmed this position in Rev. Rul. 2023-14.

DeFi and airdrops: Airdrops and hard fork tokens received for “free” are ordinary income at FMV when the taxpayer has dominion and control over the new tokens. DeFi yield (liquidity pool rewards, lending interest) is ordinary income when received.

Reporting: Starting with 2025 tax returns, crypto exchanges and brokers must issue Form 1099-DA (Digital Asset Proceeds) reporting dispositions, similar to Form 1099-B for stock sales. Taxpayers report dispositions on Form 8949 and Schedule D.

How does Canada tax cryptocurrency?

The CRA treats cryptocurrency as a commodity for tax purposes (not legal tender, not a security). The tax treatment depends on whether the activity is investment or business.

Capital gains (investment): If you buy and hold crypto as an investment and sell at a profit, the gain is a capital gain. The taxable portion is 50% of the gain (the 2024 budget proposed a higher inclusion rate above $250,000, but that proposal was cancelled in March 2025 and never took effect). The gain is the difference between the proceeds and the adjusted cost base (ACB). Canada uses an average cost method for identical properties: if you buy 1 BTC at $20,000 and another at $30,000, your ACB is $25,000 per BTC.

Business income: If the taxpayer trades crypto frequently, with the intention of making a profit from short-term price movements, the CRA can characterize the gains as business income (100% taxable). The CRA uses the same factors it uses for stock trading: frequency of transactions, holding period, knowledge of the market, time spent, leveraging, and intention at the time of purchase. Day traders and high-frequency crypto traders are likely on business income treatment.

Mining income: Crypto received from mining is business income if the mining is conducted as a business (which it usually is, given the equipment and electricity costs involved). The income is the FMV of the crypto on the date of receipt. The miner can deduct the costs of mining (equipment depreciation, electricity, internet, facility costs).

Staking and DeFi: Staking rewards and DeFi yield are treated similarly to mining income: business income or investment income depending on the scale and nature of the activity. The CRA hasn’t issued comprehensive guidance on all DeFi activities, but the general principles (income at FMV on receipt, cost basis equal to included amount) apply.

Reporting: Canada does not have a specific crypto information return equivalent to Form 1099-DA. Taxpayers self-report on Schedule 3 (capital gains) or the business income schedules of the T1 return.

What are the cross-border issues?

Dual reporting of the same gains: A US citizen living in Canada who disposes of crypto reports the gain on both the US Form 1040 (Form 8949/Schedule D) and the Canadian T1 (Schedule 3 or business income). The foreign tax credit in each country prevents double taxation. Since Canadian rates are generally higher, the US foreign tax credit typically eliminates the US tax on the same gain.

Different cost basis methods: The US uses specific identification or FIFO (first-in, first-out) for crypto cost basis. Canada uses the average cost method. This means the same disposition can produce different gain amounts in each country. The gain on the US return and the gain on the Canadian return may not match, which complicates the foreign tax credit calculation.

FBAR and Form 8938 for foreign exchange accounts: A US person who holds crypto on a Canadian exchange (like a Canadian platform) may need to report the account on the FBAR and Form 8938. The question is whether a crypto exchange account is a “financial account” for FBAR purposes. FinCEN hasn’t issued final guidance specifically addressing crypto exchange accounts, but FinCEN’s proposed rulemaking (December 2020) would have classified foreign crypto exchange accounts as reportable. As of the current date, the safe approach is to report foreign crypto exchange accounts on the FBAR if the aggregate value exceeds $10,000. Many practitioners are advising this, and the eventual regulation is expected to require it.

For Form 8938, crypto held on a foreign exchange is a “specified foreign financial asset” and is reportable above the filing thresholds.

Moving between countries with unrealized gains: When a Canadian emigrates to the US, the departure tax under ITA 128.1(4) deems a disposition of all capital property at FMV, including cryptocurrency. The departure gain is taxed on the final Canadian return. The US then establishes a cost basis at FMV on the date of US residency (matching the deemed disposition amount). No double taxation on pre-move gains.

When a US person immigrates to Canada, Canada establishes a cost basis at FMV on the date of Canadian residency under ITA 128.1(1)(b). The pre-immigration gains are excluded from Canadian tax. But if the US person is a US citizen, they continue to report crypto gains on both returns, with foreign tax credits preventing double taxation.

What about crypto-to-crypto trades?

Both countries treat a trade of one cryptocurrency for another as a taxable disposition. Selling BTC to buy ETH triggers a gain or loss on the BTC, and the ETH takes a cost basis equal to the FMV of the BTC at the time of the trade.

This creates a compliance burden for active traders who make hundreds or thousands of trades per year. Each trade is a separate taxable event. Software tools (CoinTracker, Koinly, CoinLedger) can import transaction history from exchanges and calculate gains using the appropriate method (specific identification or FIFO for US, average cost for Canada).

For cross-border filers, the software must be configured differently for each country’s return: one calculation using specific identification for the US, another using average cost for Canada. Running two separate calculations on the same transaction history is essential. Cross-border traders should also be aware that wash sale and superficial loss rules apply differently: the US wash sale rule (30-day window) applies to crypto starting in 2025 under the OBBA, while Canada’s superficial loss rule already covers crypto as identical property.

What about NFTs?

Non-fungible tokens (NFTs) are treated as property by both the IRS and the CRA. Creating an NFT and selling it’s ordinary income or business income (the proceeds minus the cost of creation). Buying an NFT and selling it later is a capital gain or loss (or business income, depending on the activity level and intent).

The IRS has indicated that NFTs that represent underlying collectibles (digital art, for example) may be treated as collectibles for US tax purposes, subject to the 28% maximum long-term capital gains rate under IRC 408(m). The IRS issued Notice 2023-27 requesting comments on this treatment. Canada doesn’t have a separate collectibles rate; NFT gains follow the standard capital gains treatment.

What forms are required?

US filer:

• Form 8949 (Sales and Other Dispositions of Capital Assets): each crypto disposition is listed here
• Schedule D (Capital Gains and Losses): totals from Form 8949 flow here
• Schedule C or Schedule 1: mining/staking income if it is business income
• Form 1040, question on digital assets: every US taxpayer must answer the digital asset question, even if they did not transact
• FBAR (FinCEN 114): if foreign crypto exchange accounts exceed $10,000 aggregate
• Form 8938: if foreign financial assets exceed the applicable threshold

Canadian filer:

• Schedule 3 (Capital Gains or Losses): capital gains from crypto dispositions
• T2125 (Statement of Business or Professional Activities): if trading is characterized as business income
• Form T1135: if total cost of foreign crypto and other specified foreign property exceeds $100,000 CAD

Related guides:

• FBAR filing requirements covers who must file and how foreign crypto exchange accounts fit into the $10,000 aggregate threshold
• Form 8938 filing requirements and thresholds explains the FATCA individual reporting that applies to crypto held on foreign platforms
• Cost basis and adjusted cost base across the border covers the mismatch between US specific identification and Canadian average cost methods
• Foreign tax credit limitation and carryover explains how the FTC prevents double taxation on crypto gains reported in both countries
• Leaving Canada permanently: tax checklist covers the departure tax on unrealized crypto gains when you emigrate
• Capital gains tax: Canada vs. US compared compares the rate structures and inclusion rules that apply to crypto dispositions in each country
• Wash sale and superficial loss rules for cross-border tax-loss harvesting covers the loss-disallowance rules that apply to crypto repurchases
• Streamlined filing for cryptocurrency reporting explains the catch-up path for crypto holders who missed FBAR or Form 8938 in prior years

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.