Carrying Capital Losses Backward or Forward

If you incurred a capital loss in a tax year, you can use it to offset any capital gains income in the same year, lowering your total income. If, however, you have a net capital loss for the year, the Canada Revenue Agency (CRA) allows you to carry those losses back up to 3 years or forward indefinitely to apply against any capital gains income. The time limits and specific application rules depend on the type of capital gain, as well as other factors.

Here are more details on carrying capital losses backward or forward.

Carrying losses backward

Since the CRA allows you to carry net capital losses back for up to 3 years, if you have capital gains from the past 3 years, this is a great way to offset them. To calculate your carryback, check the inclusion rate.

To carryback a capital loss, fill out Section II on Form T1A–Request for Loss Carryback. You do not have to file an amended return for the year to which you want the loss applied.

The losses reported on Form T1A lower your taxable income, resulting in either a refund or a reduction of your back taxes owed. However, this adjustment does not change your net income, nor your eligibility for benefits as you cannot obtain retroactive benefits as a result of carrying a capital loss backward.

Carrying losses forward

Each year, the accumulated value of your capital losses becomes your net capital losses, which you may carry forward indefinitely. If you don’t have capital gains in either the current tax year or any of the previous 3, you can carry your losses forward. You can find those amounts on your Notice of Assessment (NOA).

If you have not claimed your net capital losses by the time of your death, your representative can apply them to your final return to offset your capital gains for that year.

Claiming carried forward losses

Because you can carry capital losses forward indefinitely, you can apply losses from infinitely far back up to your current return. To carry losses forward, check your CRA My Account to obtain the current balance of your unclaimed losses. If you are not a CRA My Account holder, you can find this amount on your last Notice of Assessment from the CRA.

Fill out chart 4 of the T1A and enter the results on line 25300 of your income tax return (T1). Keep in mind that you must apply the oldest losses first.

Variable rules on carrying losses forward