Ads keep this website free for you.
TaxTips.ca does not research or endorse any product or service appearing in ads on this site.  Before making a major financial decision you  should consult a qualified professional.

Non-Capital Loss TaxTips.ca
Canadian Tax and
Financial Information

If you use an ad blocker, please consider a small contribution to help keep TaxTips.ca free for everyone.

Need an accounting, tax or financial advisor? Look in our Directory.  Use above search box to easily find your topic!   Stay Connected with TaxTips.ca!
Home
What's New
Calculators
Personal Tax
Business
Sales Taxes
Free in 30!
Financial Planning
RRSP RRIF TFSA
Real Estate
Stocks Bonds etc.
Seniors
Disabilities
Canada
Alberta
British Columbia
Manitoba
Ontario
Quebec
Saskatchewan
Atlantic Provinces
Territories
Federal Budget
Prov/Terr Budgets
Statistics etc.
Glossary
Site Map
Directory
Advertise With Us
Contact Us/About Us
Links & Resources
Glossary  -> 
Personal Income Tax ->
Small Business -> Non-Capital Loss

Non-Capital Loss

Income Tax Act s. 111(1), (5), (8)

A non-capital loss includes unused losses from office, employment, business or property, and unused allowable business investment losses (ABIL).  If the amount you calculate for line 23600 (line 236 prior to 2019) would be negative if not for the rule that it is zero if negative, then you may have a non-capital loss.

Non-capital losses can be (but don't have to be) carried back 3 years, or carried forward 7, 10 or 20 years, to offset all or part of the taxable income from any of those years.

To request a carry-back of non-capital losses to any or all of the previous 3 taxation years, a T1A Request for Loss Carry Back must be completed to calculate the amount of the loss carried back.  This form is part of tax preparation software, so can be done at the same time as your tax return.

Non-capital loss of prior years are claimed on line 25200 (line 252 prior to 2019) of the tax return.

The carry-forward periods are:

bullet for taxation years ending March 22, 2004 or earlier, 7 years.
bullet for taxation years ending after March 22, 2004, 10 years.
bullet for taxation years ending after 2005, 20 years (except ABIL).

Note that the extension of the carry-forward period to 20 years does not apply to unused allowable business investment losses (ABIL), which can only be carried forward 10 years.

Non-capital losses unused after the carry-forward period expire, and are simply lost.  Any unused ABIL after the carry-forward period becomes a net capital loss, which can be carried forward indefinitely to be offset against capital gains.

Change in Control May Restrict Use of Non-Capital Losses

Where there has been a change in control of a business, s. 111(5) of the Income Tax Act restricts the use of the non-capital losses carried forward.  If the buyer continues to operate the same business, then the losses carried forward may be deductible from the profits of that business.  It's possible the losses may also be deductible if the buyer carries on a very similar business, but often this ends up being a decision made in court.

Tax Tips -   If you have non-capital losses that are going to expire:  
     Businesses:  You could reduce or eliminate your capital cost allowance (CCA) claimed in the current year or prior years.
     Individuals:  If you have RRSPs or RRIFs, a withdrawal can create income to offset the non-capital loss.

For further information see the Canada Revenue Agency (CRA) web page 

Related Articles

Capital Gains and Losses

Allowable Business Investment Losses

Canada Revenue Agency (CRA) Resources

Line 25200 (line 252 prior to 2019) Non-capital losses of other years

Revised: August 18, 2020

 

Copyright © 2002 Boat Harbour Investments Ltd. All Rights Reserved.  See Reproduction of information from TaxTips.ca

Facebook  | Twitter  |  Monthly Newsletter Sign-up  What’s New E-mail Notification RSS News Feed
The information on this site is not intended to be a substitute for professional advice.  Each person's situation differs, and a professional advisor can assist you in using the information on this web site to your best advantage. 
Please see our legal disclaimer regarding the use of information on our site, and our Privacy Policy regarding information that may be collected from visitors to our site.