When Haman Mamdouhi made $2,500 in profit from a $5,000 investment in Bitcoin last month, the tax implications werenB次元官网网址檛 exactly top of mind.

B次元官网网址淭axing is probably the last thing on anyoneB次元官网网址檚 mind,B次元官网网址� said Mamdouhi, who is in his early 20s and started investing casually in high school.

B次元官网网址淭he first thing is B次元官网网址渙h, is Bitcoin something I should just get into, whatB次元官网网址檚 going on?B次元官网网址�

However, the Toronto-based entrepreneur says first-time investors should carefully consider the kind of money theyB次元官网网址檒l have to pay in taxes, and how they can deduct expenses to maximize the money they keep.

With a recent surge in the value of Bitcoin, and massive profits for some traders from the rapid rise (and subsequent fall) of GameStop shares, tax specialists say there are multiple ways that new traders can declare their income and expense the related costs.

In MamdouhiB次元官网网址檚 case, he said he can expense interest payments associated with a line of credit that he opened to further invest in Bitcoin. He said Quebec also allows people who mine Bitcoin to expense the computer equipment needed to do so, which can cost around $20,000.

Lisa Gittens, a tax expert with H&R Block, said the first step in filing taxes for new traders is to figure out whether theyB次元官网网址檙e investing over the long term, or if theyB次元官网网址檙e buying and selling their shares in a matter of days.

Long term investments that span the course of months or years are generally treated as capital gains, meaning that only 50 per cent of a personB次元官网网址檚 profits will be taxed.

But if a person is buying and selling stocks in a short time-frame, like in the case of those who benefited from GameStopB次元官网网址檚 dramatic rise to over USD$460 per share in a matter of weeks, the profits would generally be considered business income, and 100 per cent of the profits would go towards your personal income tax bracket.

That means that in Ontario, an investor could expect to pay back at least 20 per cent of their profits in taxes if they were in the lowest tax bracket.

But Gittens said there could be exceptions if this was your first time dabbling in day trading.

B次元官网网址淚f itB次元官网网址檚 a one off thing that you just did this investment to try it, and you get a T-slip in the mail, youB次元官网网址檇 be reporting it B次元官网网址� as investment income,B次元官网网址� said Gittens.

B次元官网网址淏ut if you look at this and you like it, and continue to (trade stocks), youB次元官网网址檒l be reporting it as business income.B次元官网网址�

For people looking to dive into day trading as a source of income, Gittens says the tax code gives Canadians opportunities to shelter their income in a registered retirement savings plan (RRSP) or a tax-free savings account (TSFA).

Canadians trading through an RRSP will have their profits treated as a capital gain and will only have 50 per cent taxed, Gittens said. The same can be true if you trade through a TFSA, but she said the Canada Revenue Agency can deny the shelter to your profits depending on how actively you trade through the account.

Day-traders also have multiple options when it comes to filing for expenses related to their work.

Gittens said people can deduct the cost of trading fees, management fees paid to stock brokers, or fees related to courses and registration with provincial securities commissions.

B次元官网网址淚tB次元官网网址檚 wonderful to know how to report income, but take advantage of our tax system that allows deductions and credits before you determine your liability,B次元官网网址� said Gittens. B次元官网网址淐laim the deductions and credits that youB次元官网网址檙e entitled to, so you can reduce the tax that you have owing on any type of investment.B次元官网网址�

Gittens pointed out the onus is on traders and investors to keep track of their investments and the profits and losses from every transaction they make. She suggested keeping a spreadsheet or using an app to track their trades.

In the complicated and sometimes informal world of Bitcoin and other cryptocurrencies, thatB次元官网网址檚 already proving to be a headache for Mamdouhi.

B次元官网网址淕iven that each transaction is a taxable event, and that you might be doing multiple transactions between (cryptocurrencies) throughout the day, it becomes almost unfeasible to even be able to do your taxes properly,B次元官网网址� said Mamdouhi.

B次元官网网址淎lready, IB次元官网网址檓 at least three days behind.B次元官网网址�

Salmaan Farooqui, The Canadian Press