Capital Losses Explained
How capital losses offset gains, carrying them back three years or forward, the superficial loss rule, tax-loss selling dates and special cases.
The short version
- A capital loss is the opposite of a capital gain: you sold for less than your adjusted cost base. Half of it (the allowable capital loss) offsets taxable capital gains.
- Capital losses only offset capital gains, not salary or other income. The exceptions: the year of death and the year before, and business investment losses on small Canadian private companies.
- Unused losses carry back three years (form T1A) or forward forever. Carrying back gets you a refund of tax already paid.
- Sell at a loss and buy the same thing back within 30 days before or after, yourself or through your spouse or company, and the superficial loss rule denies the loss for now.
- Losses on personal-use property (your car, your boat, your house) are not deductible at all.
Capital Losses Explained
A capital loss is the tax system's small consolation prize: you lost money, and now at least you can use it. Used well, a loss can wipe out tax on a gain from this year, get you a refund on gains from the last three years, or wait patiently for a future gain. Used badly, it's denied by a 30-day rule most people have never heard of. Here's how to use one.
Where a Capital Loss Can Go
| Use | How | Form |
|---|---|---|
| Against capital gains this year | Automatic: gains and losses are netted on Schedule 3 | Schedule 3 |
| Back to any of the three previous years | Reduces taxable capital gains you already paid tax on; CRA refunds the difference | T1A |
| Forward to any future year | Claimed when you have taxable capital gains | Line 25300 |
| Against any income | Only in the year of death and the year before; see the final return | Final return |
Your unused balance is on your notice of assessment and in My Account. Gains in general: capital gains tax. What a loss is worth at your income: the capital gains calculator.
Should you carry a loss back or forward?
Tell the assistant your capital gains for the last three years, this year's gains and losses, and your income. It shows where the loss saves the most and how to claim it.
The Superficial Loss Rule
Sell an investment at a loss, and if you, your spouse or a corporation you control buy the same or identical property within 30 days before or after the sale, and still own it 30 days after, the loss is denied. It isn't lost forever: it's added to the cost of the shares you bought back, so you get it when you sell those. Buying the same stock in your TFSA or RRSP also triggers the rule, and there the loss is gone for good. The adjusted cost base calculator checks for it.
| Situation | Loss allowed? |
|---|---|
| Sell XYZ at a loss Nov 20, buy XYZ back Dec 5 | No; added to the new shares' cost |
| Sell XYZ at a loss, buy back on day 31 | Yes |
| Sell XYZ at a loss, spouse buys XYZ the same week | No |
| Sell a bank ETF at a loss, buy a different bank ETF the same day | Usually yes, if not identical property |
| Sell XYZ at a loss, buy XYZ in your TFSA | No, and the loss is permanently lost |
Tax-Loss Selling in December
- Know your gains for the year first; a loss only helps if there are gains to offset now, in the past three years, or later.
- Mind the settlement date. Canadian trades settle one business day later, so the sale must settle by December 31. For 2026, that means trading by Wednesday, December 30. Check your broker's cut-off.
- Use your real ACB, not the T5008; see adjusted cost base explained.
- Wait 31 days before buying back, or buy something similar but not identical.
Special Cases
- Personal-use property such as a car, boat or furniture: gains are taxable (above $1,000), losses aren't deductible.
- Listed personal property such as art, jewellery, coins and stamps: losses only offset gains on listed personal property, carried back three years or forward seven.
- Bankrupt or worthless shares: you can elect to treat them as sold for zero and claim the loss.
- Shares of a small Canadian private company that fails: may be an allowable business investment loss, deductible against any income.
- Crypto losses follow the same rules; see crypto taxes. Stock-specific rules: stock investment taxes.
Capital Loss Questions
Can capital losses offset regular income in Canada?
Generally no. Net capital losses offset only taxable capital gains. The exceptions are the year of death and the year before death, and allowable business investment losses on shares or debt of small Canadian private businesses.
How far back can I carry a capital loss?
Three years back, using form T1A, and forward indefinitely.
What is the superficial loss rule?
If you or an affiliated person such as your spouse or a corporation you control buy identical property within 30 days before or after selling at a loss, and still hold it 30 days after the sale, the loss is denied and added to the cost of the replacement property.
Can I claim a loss on selling my car or house?
No. Losses on personal-use property, including your car, boat and home, are not deductible.
What is the last day for tax-loss selling in 2026?
The trade must settle by December 31. With one-business-day settlement, that means trading by December 30, 2026. Check your broker’s cut-off time.
Can capital losses be carried forward?
Yes, indefinitely. Unused net capital losses can be applied against taxable capital gains in any future year, and on the final return after death they can offset other income too.
Sources: CRA, Guide T4037, Capital Gains; Completing Schedule 3. Checked October 2026. Whether two funds are "identical property" depends on the facts; funds tracking the same index from different providers are a grey area. The December 30 date assumes normal market hours and one-day settlement; brokers set their own cut-offs.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.