As the tax filing deadline approaches, the Chartered Professional Accountants of Canada (CPA Canada) offers the following tax tips, in a release, to share with clients about the sharing economy and cryptocurrencies.
- Money earned from renting out a home or driving passengers in a car is taxable. Clients should report this income (net of expenses) now rather than have CRA find out about the income later, as penalties can apply.
- Clients should keep receipts and ensure that expenses are reasonable. Income earned is rental (in the case of Airbnb) or business income, and reasonable expenses can be claimed. Some expenses must be prorated, assuming clients use an asset such as a car or home for both personal and commercial use. Documenting income from the sharing economy is important in case clients must prove the expense and how much of it was personal.
- If the product a client offers is subject to GST/HST when provided commercially, they must charge GST/HST if their revenue exceeds $30,000 annually.
- Gains or profits from selling cryptocurrency is taxable. Clients should keep track of the cost of the cryptocurrency and calculate the gains when sold.
- Clients must determine if any gains are capital gains or income gains. Income gains can occur if any buying and selling is akin to a business, or an adventure in the nature of the trade. When making this determination, CRA considers factors including number of transactions, how long the taxpayer held the cryptocurrency and the taxpayer’s sophistication.
- If clients have losses, the same factors as above apply in determining whether losses are on account of capital or income. (Only one-half of capital losses can be deducted and only against capital gains.)
- When deciding whether a sale is on account of income or capital, clients generally must follow that treatment for future transactions.
For general tax filing tips, CPA Alberta offers a handy list to help clients optimize tax credits and deductible expenses.