Capital loss
A capital loss occurs when you sell, or are considered to have sold, a capital property for less than its adjusted cost base plus the outlays and expenses involved in selling the property. Capital losses can be used to offset capital gains for tax purposes. In the context of investment portfolios, capital losses are only relevant in non-registered accounts.
The Canada Revenue Agency writes:[1]
- Generally, if you had an allowable capital loss in a year, you have to apply it against your taxable capital gain for that year. If you still have a loss, it becomes part of the computation of your net capital loss for the year. You can use a net capital loss to reduce your taxable capital gain in any of the 3 preceding years or in any future year.
One key word in the quote is ‘can’: you can use your available net capital loss to reduce your taxable capital gain for the previous three years, or this year. But you don’t have to, for example if these preceding years, or the current year, are low-income years. Instead, you might want to save your net capital loss to offset capital gains during a normal-income, or a high-income year, when the tax savings will be greater due to higher tax rates.[2]
See also
References
- ^ Canada Revenue Agency, How do you use a capital loss?, modified January 18, 2022, viewed April 9, 2022.
- ^ Jason Heath, A deep dive into the 'strategic' capital gain and loss planning you should do this year, National Post, December 3, 2021, viewed April 9, 2022.
External links
- Taxtips.ca, Capital losses