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Investment Losses - Make Use of Them
Income Tax Act s. 3, 40(2)(g)(iv), 111(1)(b)
If you have a capital loss on an investment outside of an RRSP, RRIF, TFSA or other registered account, you can sell the investment and utilize the capital loss to offset it against capital gains. You can offset the capital losses against current year capital gains (not against other types of income), or you can carry back the losses to offset them against capital gains in any of the previous three years. You can also carry the capital losses forward indefinitely, to be offset against future capital gains.
If you are selling the "loss" shares near the end of the year, make sure the settlement date (normally 2 business days after the trade date) will be on or before the last business day in December, to be included as a sale in the current year.
If desired, after you sell shares to utilize the loss, you can then repurchase them, but wait at least 30 days in order to avoid having your loss disallowed as a superficial loss. If you have any of the same shares remaining at the end of the 30-day period, you will still have a superficial loss. The loss will also be a superficial loss if the shares are repurchased by a person affiliated with you, such as your spouse or common-law partner.
Do not transfer the shares to your RRSP or TFSA at a loss, because the losses will not be deductible at any time.
When losses are carried forward or back to another year, it is possible that this may increase an OAS clawback, or reduce certain tax credits. See our article on how these losses, and some types of income which do not affect taxable income, can be very taxing!
Capital Gains Can Increase Your OAS & Age Amount Clawbacks, even if you have capital losses carried forward to offset the gains.
Tax Tip: If you have capital gains in the current year or any of the previous 3 years, you can sell your losing investments to offset the capital gains.
Revised: July 31, 2023
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