Can Investment Losses Reduce Your Tax? Capital Losses and the Superficial Loss Rule

Carrying losses back and forward, and why buying back within 30 days can stop you claiming the loss

Scott Tang, CPAUpdated 2026-11-052026 rules5 min read

A loss on shares can reduce your tax, but only against capital gains — not against your employment income. Losses you can't use in the year can be carried back 3 years or carried forward indefinitely. If you sell investments at a loss at year-end to offset your gains ("tax-loss selling"), there is one rule to be most careful about: if you or an affiliated person acquire identical property within 30 days before or after the sale, and at the end of the 30th day after the sale still hold it or have a right to acquire it, the result may be a "superficial loss". All or part of that year's loss then can't be deducted for the time being; in some situations involving registered accounts, it may never be deductible.

Gains only

Ordinary capital losses can only be deducted from capital gains, not from employment or other income (exceptions for ABILs and the year of death)

Back 3 years

You can apply to deduct them from capital gains of the previous 3 years and get back tax you paid

No time limit forward

Whatever you can't use can be kept for later years

61 days

Buying identical property within 30 days before or after the sale and still holding it on the 30th day after = superficial loss

How to use a loss

1
Current year first
Deduct this year's capital losses from this year's capital gains first
2
Anything left over
That is your "net capital loss"
3
Carry back
Use Form T1A to apply it against gains of the previous 3 years
4
Carry forward
Keep it to deduct from capital gains in any later year

Superficial loss: when it applies

It applies when both conditions are met:

Bought back within 61 days
Between 30 days before and 30 days after the sale, you or an "affiliated person" bought identical property.
Still held on day 30
At the end of the 30th day after the sale, you or the affiliated person still hold that property.
Who counts as affiliated
Your spouse or common-law partner, a corporation controlled by you or your spouse, a trust of which you or your spouse is a majority-interest beneficiary (including your registered accounts such as your RRSP and TFSA), and so on.

Where you buy back	Superficial loss applies Loss can't be claimed this year	Where the loss goes Is it lost for good?
Your own non-registered account	✓	◐Added to the ACB of the new shares, and reflected when you sell them later
Your spouse's non-registered account	✓	◐Added to the ACB of your spouse's new shares
A TFSA or RRSP (yours or your spouse's)	✓	✕Generally can never be used
A corporation you control	✓	◐Added to the cost of the shares the corporation holds
Bought only from the 31st day after the sale, with no purchase in the 30 days before it	✕Doesn't apply	—Can be claimed this year
Switched to a different investment (not identical)	✕Generally doesn't apply	—Can be claimed this year

Your own non-registered account

⛔ Superficial loss applies: ✓
↪️ Where the loss goes: ◐Added to the ACB of the new shares, and reflected when you sell them later

Your spouse's non-registered account

⛔ Superficial loss applies: ✓
↪️ Where the loss goes: ◐Added to the ACB of your spouse's new shares

A TFSA or RRSP (yours or your spouse's)

⛔ Superficial loss applies: ✓
↪️ Where the loss goes: ✕Generally can never be used

A corporation you control

⛔ Superficial loss applies: ✓
↪️ Where the loss goes: ◐Added to the cost of the shares the corporation holds

Bought only from the 31st day after the sale, with no purchase in the 30 days before it

⛔ Superficial loss applies: ✕Doesn't apply
↪️ Where the loss goes: —Can be claimed this year

Switched to a different investment (not identical)

⛔ Superficial loss applies: ✕Generally doesn't apply
↪️ Where the loss goes: —Can be claimed this year

How to do year-end tax-loss selling

Claim the loss but keep the investment

Sell the shares at a loss

Buy back from the 31st day after the sale, and check that you didn't buy in the 30 days before it

You bear any rise or fall in those 30 days yourself

Claim the loss and switch right away

Sell the ETF at a loss

Buy an ETF that tracks a different index, from a different issuer

Whether it is "identical property" depends on the actual facts; avoid products that are almost exactly the same

Points to watch

The year usually follows the settlement date
A sale of securities is generally counted in the year it settles. For example, with standard T+1 settlement on Canadian and US markets, to count in 2026 the trade must be made by December 30, 2026 at the latest; check the cut-off for other markets and with your brokerage.
Foreign-currency assets are calculated in Canadian dollars
A US stock that lost money in US dollars may show a gain once converted to Canadian dollars, and the reverse can also happen.
Report a loss to keep it
Even if you have no gains this year, report the loss so that the CRA records the amount you can carry forward.
Losses on personal-use items can't be deducted
A loss on selling your own home, car or furniture generally can't be claimed as a capital loss.

How Sheng Qian CPA can help

A review before year-end
Based on this year's gains and your holdings, we look at which losses are worth realizing and whether to carry any back.
Avoiding superficial losses
We check your and your spouse's accounts, TFSAs, RRSPs and corporate accounts for buy-backs within 30 days.
Keeping your losses in use
Each year we check the net capital losses available to carry forward in the CRA's records; for prices, see "What Sheng Qian CPA Can Do for Investors: Tax Returns, Accounts and Annual Planning" in this series.

Sources

CRA: Capital losses and deductions
CRA: Capital gains (T4037) · Form T1A, Request for Loss Carryback

Disclaimer

This article is general information only and is not tax or investment advice. Everyone's situation is different; please consult a CPA about your specific arrangements. Service fees are as set out in our written quote.