Capital gains vs. income

Trades that are speculative or part of a trading business may be taxed as income; most retail disposals are treated as capital gains in many jurisdictions. Rewards such as staking yields, some airdrops, and mining income are often classified as income at receipt. Know how different events are characterized in your jurisdiction and keep detailed records.

Superficial loss / wash sale rules (Canada context)

In Canada, the superficial loss rule can disallow a capital loss if you dispose of a property at a loss and acquire the same or an identical property within 30 days before or after that disposition. This means that simple sell‑and‑repurchase within 30 days can nullify a harvested loss. Many traders work around this by waiting 31 days or using a different asset to maintain market exposure, but consult a tax professional for borderline cases.

Records, tax lots and basis tracking

Track each acquisition lot: date, price, fees, and chain details. Proper tax‑lot accounting allows you to pick lots for disposition that optimize tax outcomes (e.g., selling high‑basis lots to minimize gain). Use crypto tax software or exports from crypto exchanges to maintain an auditable ledger.

Threshold rebalancing

Set band limits for each allocation (e.g., BTC 40% ±5%). Only rebalance when an allocation breaches the band. This reduces turnover and the number of taxable events compared with calendar rebalancing.

Use inflows/outflows to rebalance first

Direct new capital or withdrawals to the over/underweight assets before selling existing positions. If you’re buying during accumulation, route buys to underweight holdings to avoid selling winners.

Rebalancing ladder / partial sells

Instead of selling a large winner all at once, sell in tranches over time to spread gains and potentially take advantage of lower tax rates in different years or offset with losses.

Identify loss clusters and strategize

Run a tax‑lot analysis to find positions with losses that won’t rebound quickly or that you’re comfortable exiting. Use losses to reduce realized gains from profitable trades earlier in the year. Remember superficial loss rules—don’t repurchase the identical asset within the disallowed window.

Maintain market exposure without violating rules

If you want exposure during the superficial loss window, consider using a similar but not identical asset (e.g., swap one small altcoin for another in the same sector) or use stablecoin positions as a neutral hedge. For BTC, many traders swap to a BTC derivative or a different asset class, but be careful: some derivatives could be considered identical for tax purposes. Always confirm with your tax advisor.

Example: Harvesting losses

Imagine you bought Alt‑X at $10,000 and it’s now $6,000. Selling realizes a $4,000 capital loss. You avoid rebuying Alt‑X for 31 days or buy a different altcoin to maintain crypto exposure. That loss can offset gains from a profitable Bitcoin trade, lowering your overall tax bill.

ETF / ETP in registered accounts

If you want long‑term Bitcoin exposure inside a TFSA or RRSP, consider regulated funds that qualify for these accounts. This avoids annual taxation on disposals and can be especially efficient for long‑term Bitcoin trading or accumulation strategies.

Be aware of platform restrictions

Some Canadian exchanges and brokers (for example, platforms that support TFSA/RRSP crypto products) provide tax reporting tailored to registered accounts. Check fees and product wrappers—tax efficiency matters alongside custody and security.

Choose orders to minimize slippage

Use limit orders where possible to control realized prices, especially for large sells that generate taxable events. Market orders are convenient but can create worse fill prices and larger reported gains or losses.

Track cross‑exchange fills and transfers

When you move crypto between exchanges, record timestamps, chain TXIDs, and fees. Transfers are not taxable events in themselves, but poor records complicate ACB calculations when you later sell.

Use fee rebates and maker/taker logic

Prefer maker orders (post‑only) on exchanges where maker fees are lower or rebated. Lower fees improve net proceeds and reduce the tax basis adjustments related to trading fees in some jurisdictions.

Avoid tax‑motivated market timing

Don’t make market timing decisions solely to reduce taxes (e.g., holding losers indefinitely to avoid realizing losses). Let trading rules and edge guide entry/exit; apply tax tools like harvesting opportunistically.

Plan ahead and avoid panic moves

Have a documented rebalancing and tax plan for the year. When volatility spikes, stick to pre‑defined rules to prevent emotionally driven disposals that create unfavorable tax outcomes.

Use a trading journal

Track trades, reasons, tax lots used, and after‑tax performance. Measuring after‑tax expectancy (R‑multiples adjusted for tax drag) clarifies whether a strategy remains profitable net of taxes.

Recordkeeping checklist

• Date/time (UTC), asset, amount
• Counterparty currency and price (in fiat) + exchange name
• TxID for on‑chain transfers, fees paid
• Tax lot chosen for dispositions
• Rationale for trade (rebalancing, harvesting, tactical)

Recommended tool features

Use portfolio trackers and tax software that support crypto exchanges (CSV/API imports), allow specific lot selection, and produce reports compatible with your local tax authority. In Canada, some exchanges provide tax exports which simplify reporting, but verify the calculations.