Reporting Your Online Trading Income in Canada

Olu Olu
Jun 30
2 min read

Investing in the markets through online trading offers exciting profit potential—but navigating tax obligations correctly is essential. To help you avoid nasty surprises, here’s a comprehensive guide on how to report your online trading activity accurately and stay CRA-compliant.

1. Capital Gains vs Business Income

Recognize which category your trading activity falls under:

Capital Gains: As at 2025, if you're buying stocks or securities as investments and holding for longer-term growth, you report capital gains—only 50% of the profit is taxable.
Business Income: Frequent, short-term trades aimed at profit—like day trading—are classified as business income, which is 100% taxable, and may require CPP/QPP contributions.

Key factors CRA examines include: transaction frequency, holding period, trading intent, time spent, and experience.

2. Reporting & Election Options

For Capital Gains: Report gains and losses on Schedule 3 (or Schedule G in Québec) with Line 12700 showing taxable capital gains. Use the T123 Election to ensure Canadian securities are treated consistently as capital gains going forward.
For Business Income: Declare under self-employment on Form T2125, where profits are fully taxable and deductible against all income sources.
T5008 Slip: Your brokerage sends these to CRA and you—they list your trades and proceeds. Even if you don’t receive one, you must self-report.

3. Tax Implications

Inclusion RateCapital gains: only 50% is added to taxable income Business income: 100% taxable
Loss TreatmentCapital losses offset capital gains only. Business losses can offset any income type.
Crypto TradingCryptocurrency is taxed the same way—50% inclusion for capital-type trades; full inclusion for business-type trades.

4. Exchange Rate Rules

When dealing in foreign currencies (e.g., USD), convert each trade's proceeds and cost base using the rate on the trade date or annual average.

5. Documentation & Record-Keeping

CRA requires detailed documentation to back your tax returns, including:

Trade confirmations (quantity, date, price)
Commission/fees paid
Currency exchange rates used
T5008 and other brokerage slips (keep even if you don’t file them)

6. CRA’s Guidance & Tax Compliance

The CRA uses T5008 and other platforms to verify transaction reporting. Misclassification—such as treating business income as capital gains—can trigger reassessments.

Summary Table

Activity Type	Declared On	Inclusion Rate	Deductibility	Notes
Capital Gains	Schedule 3 / Line 12700	50%	Losses only vs capital gains	T123 election ensures consistent treatment
Business Income	T2125 schedule	100%	Against any income	CPP/QPP self-employed contributions possible
Crypto Trades	Schedule 3 or T1	Same as above	As above	Follow CRA's crypto-specific guidelines

Final Tips

Assess your activity: Track your trading habits to determine if they align with an investment vs trading business.
Elect properly: Use T123 for Canadian securities, and answer CRA questions accurately.
Document meticulously: Keep T5008 slips, confirmations, FX rates, form T123, and Schedule 3 or T2125.
Consult a tax professional: If unsure, seek expert advice—especially for high-volume or crypto traders.