Capital gains vs business income: how Canada's CRA taxes active traders
Two Canadian traders can make the same profit and owe very different tax. General information on why the CRA's capital-versus-business line matters, the factors it weighs, how losses are treated, what Form T123 does and does not cover, and the records to keep each year.
Plays from YouTube once you press play (nothing loads before that). Captions included · watch on YouTube
In this video
- 0:00 Intro
- 0:28 Why the label matters
- 0:50 Losses
- 1:17 What the CRA weighs
- 1:44 Form T123
- 2:14 Illustrative numbers
- 2:45 Records to keep
- 3:14 Free calculator
Key points
- Capital account: CRA pages currently describe a one-half inclusion rate; business income is fully taxable but expenses are generally deductible.
- Net capital losses generally only offset taxable capital gains (3 years back, any future year); business losses generally reduce other income.
- The CRA weighs frequency, holding period, knowledge, time spent, margin, advertising and the type of securities together; no single factor decides.
- Form T123 (s.39(4)) makes Canadian securities capital property for that year and all later years, cannot be reversed, and is not open to traders or dealers.
- Document trade counts, holding periods, hours, financing and prior filings every year, and get a qualified tax professional's view before filing.
Examples use round, illustrative numbers and are not actual trades or results. Education only — not investment, tax or legal advice. Narration uses two AI-generated voices.
Get the free position-size calculator
Turn any stop into a contract count, rounded down and costs included, plus an email when new guides and the playbook are published.