All the Numbers

Capital losses and the superficial-loss rule

From the All the Numbers wiki · Investing

Selling a non-registered investment for less than its adjusted cost base is a capital loss. It can be used only against capital gains, never against pay or interest. Losses in a TFSA or RRSP are not recognised at all. How the cost base is worked out is covered in capital gains.

The rules

  • Half of a loss is allowable, matching the 50% inclusion rate on gains.[1]
  • Same year first. An allowable loss is applied against that year's taxable capital gains.
  • A net capital loss carries back three years or forward indefinitely. Carried back, it reduces taxable gains of those earlier years and produces a refund (Form T1A). Carried forward, it reduces gains of any later year. In either direction it is limited to the taxable capital gains of the year it is used in.[2]
  • Superficial loss. A loss is denied if, within 30 days before or after the sale, the same person or someone affiliated with them (a spouse, a controlled corporation, their own RRSP or TFSA) buys the same or identical investment and still holds it on day 61. The denied amount is added to the cost base of the replacement investment, so it is deferred rather than lost. When the replacement is inside a registered account, it is lost.[3]
  • Partial repurchase. CRA's practice is to deny the loss in proportion to the smaller of the units sold, the units bought in the window and the units still held at the end.[4]

What the engine does

  • Offsets losses against gains in the same year, and carries an unused net loss forward to later years of the plan.
  • Applies a carryback only when a person has asked for it, and only to earlier years inside the plan, oldest first. The refund arrives with the following April's return.[5] See tax withheld and refunds. All the Numbers' form does not offer the election, so plans built there carry losses forward only.
  • Can apply the superficial-loss rule, including the proportional reduction, when told the facts of the repurchase.
  • Treats a loss from a withdrawal that sells investments for less than they cost as allowable. That assumes the same investment is not bought back within 30 days.[6]

What it deliberately does not

  • It does not detect a superficial loss. The repurchase facts are supplied, not found.
  • It does not carry a loss back to years before the plan began; those years cannot be reassessed.
  • It does not carry non-capital (business or rental) losses back, only forward. See renting out a suite.

See also

  • Capital gains and the adjusted cost base · Selling an investment for more than its adjusted cost base is a capital gain, and half of it is added to taxable income in the year of the sale. Growth that has not been sold is not taxed.
  • Renting out a suite · Rent from part of your home is taxable income. The costs of the whole home are deductible only for the rented share, mortgage principal and land transfer tax are not deductible, and a loss offsets other income when the rental is run to earn money. A lender may count part of the rent when you apply.
  • RRSP room, deduction and withdrawals · Room accrues at 18% of earned income up to the annual cap, contributions earn a deduction refunded the following April, and withdrawals are taxed as income. The plan assumes you start with no carried-forward room unless you say otherwise.
  • Selling a home · A sale turns the home's projected market value into cash after selling costs (your province's typical commission, the sales tax on it and legal fees) and the mortgage payout. The gain on a principal residence is exempt from tax, apart from the part that was rented out when the exemption does not cover it.
  • Tax withheld from pay, and the April refund · Employers withhold income tax, CPP and EI from each paycheque as an estimate. The real tax is worked out on the return, and the difference arrives or is owed the following April.
  • TFSA contribution room · Room starts accruing the year you turn 18, not the year you open an account, and it never expires. Withdrawals come back the following January. Limits past 2026 have not been announced, so the plan projects them by the rule the Act sets and says so.

References

  1. ↑CRA Guide T4037, Capital Gains 2025 ("The inclusion rate for 2025 is 50%"; 2/3 proposal cancelled per PM release 2025-03-21) · Capital gains inclusion rate (individuals) · 50% · effective 2001-01-01
  2. ↑ITA 111(1)(b) ("the 3 taxation years immediately following the year"), 111(1.1), 111(3); Form T1A · Net capital loss carries back three years and forward indefinitely, limited to the year's taxable capital gains; older losses first · 3 years · effective 1972-01-01
  3. ↑ITA 54 "superficial loss"; 40(2)(g)(i); 53(1)(f); 251.1; T4037 ch.5 · Superficial loss: loss denied where the taxpayer or an affiliated person (spouse, controlled corporation, own RRSP/TFSA/RRIF) acquires identical property within 30 days before or after and holds it at day 61; the denied amount is added to the ACB of the substituted property · See the source · effective 1972-01-01
  4. ↑Guide T4037 ch.5 superficial loss example; archived IT-387R2 ¶3 · Partial repurchase: denied loss = loss × min(units sold, units acquired in the window, units held at the end) ÷ units sold — CRA administrative practice, not statutory text · See the source · effective 1972-01-01
  5. ↑ITA 111(1)(b); Form T1A · Carryback is an explicit per-person election; applied to in-plan prior years only, oldest first, refunded the following April with the ordinary refund · See the source · effective 2026-09-18
  6. ↑CRA — What is a superficial loss (ITA 54 "superficial loss", 40(2)(g)(i)) · When a short month sells part of a non-registered account for less than it cost, the loss is taken as allowable — the planner assumes you do not buy the same investment back within 30 days, which would make it a superficial loss and deny it · effective 2026-10-01