Should You Invest in Cryptocurrency Personally or Through Your Corporation?

As cryptocurrency investing in Canada continues to grow, many incorporated professionals – especially consultants, IT specialists, and entrepreneurs – are asking an important question:
Is it better to invest in crypto personally or through my corporation?

Let’s explore this question through the example of “Arjun,” a Canadian IT consultant who operates through a Canadian-controlled private corporation (CCPC). His case highlights how crypto tax planning in Canada depends on corporate structure, income type, and timing.

Background: The Investor’s Profile

Arjun has been an incorporated IT consultant for nearly a decade. His corporation has accumulated about $150,000 in retained earnings, and he holds around $10,000 personally. He also owns a rental property under his name.

When he consulted with Madan CPA, he wanted to know:

1. Whether cryptocurrency investments (long-term holdings, not trading) should be made personally or corporately.
2. How corporate taxes in Canada and the Small Business Deduction (SBD) would be affected.
3. How to minimize taxes on rental property sales if proceeds were reinvested in crypto.

• Investing in Crypto: Personal vs. Corporate Ownership

Personal Investment

If crypto is held personally, only 50% of the capital gain is taxable.
For someone in the top Ontario tax bracket, this results in an effective tax rate of about 26.77% on gains. Reporting is straightforward, and it doesn’t affect the SBD on your corporation’s active income.

Example:
 If you make a $100,000 crypto gain, you pay roughly $26,765 in tax and retain $73,235 after tax.

Corporate Investment

If crypto is held inside your corporation, things become more complex—but potentially more rewarding.
Corporate investment income is treated as passive income and taxed at around 50.2%. However, part of this tax is refundable through the Refundable Dividend Tax on Hand (RDTOH) when dividends are paid, and the non-taxable half of the capital gain can be credited to the Capital Dividend Account (CDA), which allows for tax-free withdrawals.

Example:
 A $100,000 crypto gain held corporately:

• 50% ($50,000) is taxable at 50.2% → $25,100 tax
• Dividend refund (RDTOH): +$15,350
• Non-taxable half ($50,000) added to CDA
• Final after-tax result: $75,000, slightly higher than personal investing

However, if your passive income exceeds $50,000, your SBD benefit starts to erode—meaning the savings from corporate investing can vanish quickly.

• Understanding the Small Business Deduction (SBD) Clawback

The Small Business Deduction (SBD) is one of the biggest tax benefits for CCPCs, reducing the corporate tax rate to 12.2% in Ontario on the first $500,000 of active business income.

However, the SBD starts to phase out when passive investment income—such as interest, dividends, or crypto gains—exceeds $50,000 per year. For every $1 of excess passive income, $5 of SBD room is lost. By the time you reach $150,000 of passive income, the SBD is completely eliminated.

Example:

If your corporation earns $150,000 in consulting income and $75,000 in passive crypto income:

• You are $25,000 above the limit.
• The SBD limit is reduced by $125,000 ($25,000 × 5).
• That $125,000 is taxed at 5% instead of 12.2%, costing an extra $17,875 in corporate tax.

In short: while corporate crypto investing can offer short-term advantages, losing the SBD can quickly make personal investing more efficient overall.

Smart Tax Planning for Crypto Investors

To make the most of your investments, you’ll need a crypto tax strategy that keeps your total passive income under control while optimizing both personal and corporate tax outcomes.

Tips for Effective Crypto Tax Planning:

• Keep corporate taxable passive income below $50,000 per year to preserve the SBD.
• Spread large crypto sales over multiple years to avoid crossing the passive income threshold.
• Gradually withdraw retained earnings and invest personally to balance corporate deferral and individual simplicity.
• Track crypto transactions carefully for accurate CRA reporting and capital gains documentation.

In Arjun’s case, maintaining crypto gains under $100,000 annually (to stay within the $50,000 taxable passive income limit) allowed him to retain his SBD and still benefit from corporate tax deferral.

• Selling a Rental Property to Invest in Cryptocurrency

Arjun also wanted to sell his rental property and reinvest in crypto. While this can be appealing, the Canada Revenue Agency (CRA) does not allow a tax-deferred rollover similar to the U.S. “1031 exchange.” This means selling your property triggers capital gains tax, even if you reinvest the money in crypto.

Ways to Reduce the Tax Impact:

• Principal Residence Exemption (PRE): If the property was once your home, you may qualify for a partial exemption.
• Deduct sale-related expenses like realtor commissions, legal fees, and advertising.
• Contribute to RRSPs if you have unused room—this can offset income from the sale.
• Apply prior capital losses from previous years to offset your gain.
• Time the sale strategically, ideally in a year when your income is lower.

While reinvesting in cryptocurrency doesn’t defer tax, these strategies can help you reduce the capital gains tax in Canada significantly.

Conclusion: The Balanced Approach Wins

For incorporated professionals, personal crypto investment remains simpler and more predictable.
Corporate investing, on the other hand, offers some tax deferral benefits but comes with the risk of SBD clawback.

A hybrid approach often works best:

• Keep corporate passive income under $50,000
• Move profits out gradually for personal investing
• Combine both structures for maximum tax efficiency

If you’re planning to sell a property or allocate retained earnings to crypto, professional guidance can ensure your plan aligns with CRA crypto tax rules and long-term wealth goals.

Key Takeaways

• Manage passive income under $50,000 to preserve your SBD.
• Personal investing offers simplicity and clarity.
• Use RRSPs, losses, and PRE to offset property sale taxes.
• A blended crypto investment strategy gives optimal results.

Ready to Build Your Crypto Tax Strategy?

Get expert guidance from Madan CPA, one of Canada’s leading firms for crypto tax planning, corporate structuring, and cross-border taxation.

Book your consultation today to discover how to maximize after-tax returns on cryptocurrency investments in Canada.