Reporting Investment Income in Canada: Capital Gains, Crypto & Dividends Explained

Investing to grow your wealth is rewarding—but comes with financial responsibilities. In Canada, all profits from investments—whether from stocks, dividends, or cryptocurrency—are potentially taxable unless held within tax-free accounts like a TFSA.

If you misreport or fail to report correctly, you may:

• Face CRA audits, reassessments, or penalties

• Make reporting mistakes that trigger CRA scrutiny

• Miss opportunities for legitimate tax optimization

Below, learn how to correctly declare three common types of investment income: capital gains, cryptocurrency, and dividend income.

1. Capital Gains: Only 50% Is Taxable—but Must Be Reported Accurately

When you sell an investment (stocks, ETFs, real estate not used as a principal residence) for more than its original cost, the profit is considered a capital gain.

How CRA taxes capital gains:

• Only 50% of the gain is taxable

• The taxable portion is added to your income and taxed at your marginal rate

Example: Bought shares for $5,000, sold for $9,000 → $4,000 capital gain → CRA taxes you on $2,000 (50%).

How to report:
Use Schedule 3 on your T1 return with details including:

• Purchase and sale dates

• Purchase cost and sale price

• Brokerage fees (which are deductible)

💡 Note: Gains inside a TFSA are tax-free. For non-registered accounts, all transactions must be reported.

2. Cryptocurrency: Declare Wisely—Depends on Your Activity

CRA considers crypto (Bitcoin, Ethereum, tokens) as either investment property or business income, depending on your trading habits.

• Passive crypto investor (buy-hold-sell long-term): treated as capital gains (50% taxable)

• Active trading, mining, staking, flipping: considered business income—100% taxable as self-employment income

What to report:

• Purchase and sale dates

• Crypto type

• CAD value at each transaction

• Profit or loss amount

💡 Tip: Use tracking tools like Koinly or CoinTracker to generate year-end transaction reports for your tax filing.

🚫 Warning: Don’t assume crypto goes unnoticed—CRA now works with major exchanges to match user data.

3. Dividends: Declared and Taxed—with Benefits

Dividends are earnings you receive from holding shares of companies, especially Canadian corporations.

Canada offers preferential tax treatment on dividend income through gross-up and dividend tax credits.

Types of dividends:

• Eligible dividends: from public or large corporations—higher credit

• Non-eligible dividends: from small or private companies—lower credit

You’ll receive a T5 slip showing:

• Actual dividend paid

• Grossed-up amount

• Estimated dividend tax credit

💡 Important: You must declare dividends on the “Dividend Income” line in your T1 return—even with tax credit applied.

4. Common Mistakes in Reporting Investment Income

• Failing to record Adjusted Cost Base (ACB), leading to incorrect capital gains

• Mixing tax-free (TFSA) and taxable accounts, and misreporting transactions

• Ignoring small crypto trades assuming “CRA doesn’t notice”

• Not declaring foreign dividends—this can trigger penalties and reassessments

• Overusing a TFSA with frequent trades—CRA may consider it a business activity and revoke tax-free status

5. Tips to Optimize Investment Taxes

• Maximize TFSA contributions for long-term capital growth

• Use RRSP to defer tax and reduce taxable income in high-income years

• Record and report deductible fees like brokerage charges or transfer fees

• Declare capital losses—they can offset gains in future years

• Don't treat TFSA as a day-trading account—frequent trading could invalidate tax shelter status

✅ Conclusion

Investing is a long-term journey—and accurate tax reporting is a vital part of it. Whether you're investing in stocks, crypto, or receiving dividends, CRA expects honest and compliant reporting.

Be sure to:

• Keep meticulous records

• Know which accounts are taxable and which are tax-free

• Prepare clear year-end documentation, especially for numerous transactions

• Seek help from a tax professional if you handle multiple instruments

📩 Have multiple investment transactions this year and aren't sure how to report them?
TikiTax specializes in filing tax returns for investments—stocks, crypto, RRSPs, and dividends—so you can report efficiently, safely, and legally.
Contact us today for full support!