CRA rules for NFT buyers, sellers, and creators — capital gains, business income, royalties, and how to report NFT transactions on your T1 return.
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Get KOHO Free — Code 45ET55JSYANon-fungible tokens (NFTs) are unique digital assets stored on a blockchain. The CRA has not issued specific NFT guidance, but general crypto tax principles apply. NFTs are treated as property — similar to collectibles or investment assets — for Canadian tax purposes.
Whether your NFT activity generates capital gains or business income depends on your intent and pattern of behaviour. Collectors who buy and hold NFTs for appreciation will generally have capital gains. Frequent traders and creators who sell NFTs as part of a business will have business income — taxed at the full marginal rate.
CRA looks at factors including:
When you purchase an NFT using cryptocurrency (most commonly ETH), you are disposing of that cryptocurrency. This triggers a capital gain or loss calculation on the crypto used to buy the NFT.
You buy an NFT for 0.5 ETH. Your ACB for that 0.5 ETH is $1,000 CAD. The current value of 0.5 ETH is $1,500 CAD (the NFT's purchase price). You have a capital gain of $500 on the ETH used. The NFT now has an ACB of $1,500 CAD.
When you sell an NFT, the proceeds (in CAD) minus your ACB equals your gain or loss. If you paid for the NFT in ETH, your ACB in CAD was the ETH value at the time of purchase.
| Scenario | Tax Treatment | Inclusion Rate |
|---|---|---|
| Collector sells NFT at a gain | Capital gain | 50% (under $250K) |
| Frequent flipper sells NFT | Business income | 100% (fully taxable) |
| Creator sells original NFT | Business income | 100% |
| NFT sold at a loss | Capital loss (or business loss) | Offsetting treatment |
You also trigger a separate capital gain on any crypto received as proceeds — but since you're immediately receiving the crypto as proceeds of the NFT sale, the proceeds are the FMV at the time of sale, and your new ACB in the crypto received is that same FMV.
If you create and sell NFTs, the revenue is business income — not a capital gain. This applies to artists, developers, and anyone creating NFTs for sale. Business income from NFT creation is fully taxable at your marginal rate.
Many NFT smart contracts pay the original creator a royalty (e.g., 5-10%) on every secondary sale. These royalties are business income when received, at their CAD value. They must be reported as business income on Form T2125 each year.
If you hold NFTs as investments (capital gains treatment), losses on NFT sales are capital losses — deductible against capital gains only. You cannot use NFT capital losses against employment income or other income types.
If you're a business NFT trader and realize losses, those are business losses — deductible against all income types, which is more favourable.
The NFT market experienced severe declines after the 2021 peak. Many Canadians who purchased NFTs at high prices may have significant unrealized losses. These become deductible only when you actually dispose of the NFT.