Capital Gains on Stocks, Crypto, and Investments in Canada: What You Owe the CRA

Whether you have been holding a stock portfolio for years and finally decided to sell, or you traded cryptocurrency through a volatile market, the CRA expects you to account for every gain. Capital gains on stocks and investments in Canada are not optional disclosures — they are reported on your annual T1 General, and the CRA has increasingly sophisticated ways of identifying under-reporting.

This article explains how capital gains work across the most common investment types — stocks, ETFs, mutual funds, and cryptocurrency — and highlights the record-keeping and reporting requirements you need to know.

The Basic Framework: Proceeds Minus ACB

No matter the asset type, the calculation starts the same way:

Capital Gain = Proceeds of Disposition − Adjusted Cost Base (ACB) − Selling Expenses

• Proceeds of disposition: the sale price (or fair market value in some cases)
• ACB: what you originally paid, averaged across all identical units held (see our dedicated article on ACB)
• Selling expenses: commissions, transaction fees paid on the sale

The resulting capital gain — or loss — flows through Schedule 3 of your T1 General.

Stocks and Shares: The Averaging Rule

When you hold shares of the same company in the same account, the CRA requires you to average your cost across all shares held. You cannot cherry-pick specific lots (e.g., "I'm selling the shares I bought in 2019 at $10" when the average cost across all your shares is $25). The identical-property averaging rule applies to all publicly traded shares.

This means you must update your ACB every time you:

• Buy more shares of the same company
• Receive a stock dividend or reinvested dividend
• Participate in a stock split or consolidation
• Transfer shares between accounts (the ACB travels with the shares)

T5008 Slips: Useful but Incomplete

At tax time, your broker will issue a T5008 slip showing proceeds of disposition — the amount you received from each sale. The T5008 does not reliably include your ACB. You are responsible for tracking and reporting the correct ACB. Using proceeds alone as your gain is a common and costly error.

ETFs and Mutual Funds: The Reinvestment Trap

ETFs and mutual funds distribute income periodically — interest, dividends, and capital gains distributions. Many investors elect to have these distributions automatically reinvested in additional units. Here is the trap:

• The reinvested distribution is taxable income in the year you receive it (reported on a T3 or T5 slip).
• It also increases your ACB by the same amount.

If you forget to add reinvested distributions to your ACB, you will pay tax on the same money twice: once when you receive the distribution, and again when you sell and understate your ACB. This is one of the most common errors on investment tax returns.

Cryptocurrency: Every Transaction Is a Taxable Event

The CRA treats cryptocurrency as capital property (or in some cases as inventory if you are in the business of trading). This has far-reaching implications:

• Every time you sell crypto for Canadian dollars, you have a disposition with a capital gain or loss.
• Every time you trade one crypto for another (e.g., Bitcoin for Ethereum), you have a disposition of the first coin — at its fair market value in Canadian dollars on the date of the trade.
• Crypto used to buy goods or services triggers a disposition at the fair market value of the crypto on the date used.
• Mining rewards and staking rewards are generally income when received (at fair market value), and that value becomes your ACB for those coins.

The averaging rule applies to each type of cryptocurrency separately. Every Bitcoin you hold is pooled; every Ethereum is pooled separately. Tracking this manually across potentially hundreds of transactions is extremely difficult — crypto-specific accounting software is essentially mandatory for anyone who traded actively.

The CRA is actively looking for unreported crypto gains. Financial institutions and exchanges are subject to reporting requirements, and the CRA has sought information from Canadian exchanges. Do not assume crypto gains are invisible.

Registered Accounts: Where Capital Gains Don't Apply

Capital gains inside a TFSA or RRSP are not reported and not taxed — the registered account shelters them. This makes registered accounts ideal for holding investments with high growth potential or frequent realisations.

Gains inside an RESP are similarly sheltered until withdrawal, at which point they are taxed in the student's hands as "education assistance payments."

This is the main reason to hold your highest-return, most-actively-traded investments inside registered accounts whenever possible — and to hold dividend-paying or bond investments in taxable accounts (where the tax treatment may be more favourable, in some cases, than growth assets).

Foreign Investments: Currency Conversion Required

If you hold U.S. or other foreign stocks, all capital gain calculations must be done in Canadian dollars. You convert both your ACB and your proceeds to CAD at the exchange rate applicable on each date. The Bank of Canada's historical noon or closing rates are commonly used.

Foreign investments may also be subject to foreign withholding taxes on dividends, and large holdings in foreign accounts may trigger the T1135 foreign income verification filing requirement. Speak with an accountant if your total foreign property cost exceeds the threshold.

Frequently asked questions