Minting and selling non-fungible tokens (NFTs) could fall into one of these tax categories:

NFT transactions as capital gains

The CRA requires you to determine the gain or loss for tax purposes on the difference between the cost of a capital asset and what it's ultimately sold for. You have a capital asset when you want to buy, hold, and then sell it. For example, you bought an NFT for $300 hoping it'd go up in value. You sold it later for $500. The $200 difference in capital gains would result in a taxable capital gain of $100 being taxed under current tax rules. This method of reporting NFT amounts should be used for casual collectors, and isn't allowed for trading businesses or those minting NFTs with the intention of selling for profit.

To report these amounts in TurboTax, use the following instructions. If you require more lines than are provided, refer to the following article.

NFT transactions as business income

If you are minting, creating, or acquiring NFTs with the sole purpose of selling for a profit as a business, this should be reported for income tax as business income. For example, if you’ve created/minted multiple NFTs and sold them for $3,000 in profit, and the effort required to do that amounts to a business activity, that amount would get added to your reported business income and taxed accordingly. This method of reporting NFT amounts is intended for those creating/minting NFTs in a systematically organized and profit-oriented manner.

These amounts would then be entered into TurboTax under self-employed (business) income. Refer to the CRA website for additional information.

NFT transactions as investment income

If you are making NFTs to make money from royalties in your smart contracts, you should record the money in TurboTax as investment income. For example, if you’ve created/minted and sold multiple NFTs with royalty rights retained by you, you’ll receive a royalty upon the subsequent re-sale of each NFT in the resale market. You enter those royalty amounts as investment income and are taxed accordingly. The original sale of the NFT is reported in one of the two ways described in the preceding two sections.