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When deductions or losses exceed income, the excess may become a loss that can be applied to other years. Losses are deducted in computing taxable income, not net income, so they do not increase income-tested benefits. Losses must be requested; the CRA does not apply them automatically except in limited cases.
NON-CAPITAL LOSSES (LINE 25200)
NON-CAPITAL LOSSES (LINE 25200)
Arise mainly from business or property losses that exceed other income, including losses from self-employment and allowable business investment losses.
Can be carried back three years or forward twenty years.
A carryback is requested on Form T1A, filed with the return for the loss year.
Can be used against any type of income.
NET CAPITAL LOSSES (LINE 25300)
NET CAPITAL LOSSES (LINE 25300)
Allowable capital losses (half of capital losses) in excess of taxable capital gains for the year.
Can be carried back three years or forward indefinitely, but only against taxable capital gains.
In the year of death and the immediately preceding year, net capital losses can be deducted against any income.
Losses from years with a different inclusion rate are adjusted to the inclusion rate of the year in which they are used.
RESTRICTED LOSSES
Listed personal property losses: losses on art, jewellery, rare books, stamps and coins can offset only gains on listed personal property, carried back three years or forward seven.
Personal-use property losses: losses on cars, boats or furniture are not deductible at all.
Farm losses and restricted farm losses: carried back three years and forward twenty, with restricted farm losses usable only against farm income.
Limited partnership losses: carried forward indefinitely, usable only when the partner's at-risk amount allows.
STRATEGY
Carrying a capital loss back can generate an immediate refund of tax paid on gains in the previous three years.
Applying non-capital losses to years with high marginal rates maximises their value.
Track unused balances; the CRA shows net capital loss balances on the Notice of Assessment and in My Account.
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