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Updated 2mo ago.
Updated 2mo ago.
A capital loss occurs when you sell an investment for less than its purchase price. In Canada, capital losses can be used to offset your taxable capital gains, in the same year or by carrying them back 3 years or forward indefinitely.
You sell units of ZEB.TO at a $2,000 loss in your non-registered account. That same year, you realized a $5,000 gain on XIC.TO. Your $2,000 loss reduces your taxable gain to $3,000. Watch out for the superficial loss rule: if you repurchase ZEB.TO (or a substantially identical ETF) within 30 days, the CRA will deny the loss.
Capital losses are a powerful tax planning tool. They are useless in a TFSA or RRSP (since gains are not taxed there). In a non-registered account, strategically selling at a loss near year-end (tax-loss harvesting) can reduce your tax bill.