Capital losses

You can carry your 2025 net capital loss  back to 2022, 2023, and 2024 and use it to reduce your taxable capital gains in any of these years. When you carry back your net capital loss, you can choose the year(s) to which you apply the loss.

When you apply a net capital loss back to a previous year's taxable capital gain, it will reduce your taxable income for that previous year. However, your net income, which is used to calculate certain credits and benefits, will not change.

To apply a 2025 net capital loss to 2022, 2023, or 2024, complete "Part 5 – Net capital loss for carryback" on Form T1A, Request for Loss Carryback. This form will also help you determine the amount you have left to carry forward to future years. Do not file an amended Income Tax and Benefit Return for the year you want to apply the loss.

You can apply your net capital losses  of other years to your taxable capital gains in 2025. To do this, claim a deduction on line 25300 of your 2025 Income Tax and Benefit Return. However, the amount you claim depends on when you incurred the loss. This is because the inclusion rate  used to determine taxable capital gains and allowable capital losses has changed over the years. 

When you apply a net capital loss from a previous year to the current year's taxable capital gain, it will reduce your taxable income for the current year. However, your net income, which is used to calculate certain credits and benefits, will not change.

You have to apply net capital losses of earlier years before you apply net capital losses of later years.

You can use a net capital loss of a previous year to reduce a taxable capital gain in 2025. If the inclusion rates for the two years are different, you must adjust the amount of the net capital loss to match the inclusion rate for 2025. To do so, you can complete the following charts of the Capital Gains Worksheet, depending on your situation:

• Line 25300 – Net capital loss of other years (if you do not have pre-1986 capital loss balance), if you do not have a balance of unapplied net capital losses from before May 23, 1985, and your 2024 notice of assessment or notice of reassessment shows that you have unapplied net capital losses of other years, a 2024 net capital loss, or both, to determine your net capital losses of other years that you can apply to 2025
• Line 25300 – Net capital loss of other years (if you have pre-1986 capital loss balance), if you have a balance of unapplied net capital losses from before May 23, 1985, or you want to keep a breakdown of your unapplied net capital losses by year

Special rules for losses incurred before May 23, 1985

Special rules apply to losses you incurred before May 23, 1985. This also includes losses you incurred after May 22, 1985, on any disposition of capital property made under an agreement of sale you entered into before May 23, 1985.

Usually, you can apply net capital losses of other years only against taxable capital gains. However, if you incurred the losses before May 23, 1985, you may use them to offset other income. Once you have applied your net capital losses of other years against taxable capital gains, you can use any excess to offset other income. The amount you can use is limited to the least of the following:

• the excess amount
• $2,000
• your pre-1986 capital loss balance available for 2025

Calculate your pre-1986 capital loss balance available for 2025 as follows:

If you had a net capital loss during the period from January 1, 1985, to May 22, 1985, and you had taxable capital gains later in 1985, your taxable capital gains will reduce your pre-1986 capital loss balance.

You have a listed personal property (LPP) loss  if, in a particular year, your losses from dispositions of LPP are more than your gains from such dispositions. Applying this type of loss is different from applying other capital losses because of the following reasons:

• You can only deduct losses from the disposition of LPP from any gains you had from selling other LPP
• The total LPP losses you deduct in the year cannot be more than your total LPP gains from such dispositions for that year
• You cannot use this type of loss to reduce any capital gains you had from selling other types of property

If you have an LPP loss in 2025, you can use the loss to reduce gains from dispositions of LPP you had in any of the three years before 2025 or the seven years after.

For information on how to apply a prior-year LPP loss to 2025 gains from dispositions of LPP, see Listed personal property (LPP) losses.

To carry back your 2025 LPP losses to reduce your LPP net gains from 2022, 2023, and 2024, complete Form T1A, Request for Loss Carryback, and include it with your 2025 income tax and benefit return. Do not file an amended return for the year to which you want to apply the loss.

A superficial loss can occur when you dispose of capital property  for a loss and both of the following conditions are met:

• You, or a person affiliated with you, buys, or has a right to buy, the same or identical property (called "substituted property") during the period starting 30 calendar days before the sale and ending 30 calendar days after the sale
• You, or a person affiliated with you, still owns, or has a right to buy, the substituted property 30 calendar days after the sale

If you have a superficial loss in 2025, you cannot deduct it when you calculate your income for the year. However, if you are the person who acquires the substituted property, you can usually add the amount of the superficial loss to the adjusted cost base  of the substituted property. This will either decrease your capital gain or increase your capital loss when you sell the substituted property.

In certain situations, when you dispose of capital property, the loss may not be considered a superficial loss. Some of the more common situations include the following:

• You are considered to have sold the capital property because you became or ceased to be a resident of Canada.
• You are considered to have sold the property because you changed its use.
• You disposed of the property and within 30 calendar days after the disposition you became or ceased to be exempt from income tax.
• The property is considered to have been sold because the owner died.
• The disposition results from the expiry of an option.
• The property is appropriated by a shareholder on the winding-up of a corporation.
• Non-depreciable capital property is disposed of by a corporation, partnership, or trust. In this situation, although the loss is not added to the adjusted cost base of the transferred property, it is not claimed immediately but its recognition is deferred pending the occurrence of certain events. For more information, call 1-800-959-8281.

If you run your farm as a business, you may be able to deduct a farm loss in the year. However, if your main source of income is neither from farming nor from a combination of farming and some other source of income, you can only deduct a portion of your farm loss for the year. 

For more information, see the following guides:

• Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income
• Guide RC4060, Farming Income and the AgriStability and AgriInvest Programs Guide
• Guide RC4408, Farming Income and the AgriStability and AgriInvest Programs Harmonized Guide

The portion of the loss that you cannot deduct becomes a restricted farm loss (RFL). You can carry an RFL incurred in tax years ending before 2006 back three years and forward up to 10 years.

You can now carry an RFL incurred in tax years ending after 2005, back three years and forward up to 20 years.

However, the amount you can deduct in any year cannot be more than your net farming income for that year. For more information on determining your main source of income and how to calculate an RFL, see Guide T4002, RC4060, or RC4408.

You may have RFLs that you incurred in your farming operation that you could not deduct when you calculated your income for previous years. You can apply part of these RFLs against any capital gain you may have when you sell your farmland. The amount of RFLs that you can apply cannot be more than the property taxes and interest on money you borrowed to buy the farmland that were included in the calculation of the RFLs for each year. Reduce your capital gain by adding these amounts to the adjusted cost base (ACB)  of your farmland. Also, you have to reduce your RFL balance by these amounts.

You can only use RFLs to reduce any capital gain from selling your farmland to zero. You cannot use an RFL to create or increase a capital loss from selling farmland.

If you had a business investment loss in 2025, you may be able to deduct a portion of the loss from income. The amount of the loss you can deduct from your income is called your allowable business investment loss (ABIL). Complete the chart for line 21700 of the Capital Gains Worksheet, to determine your ABIL and, if applicable, your business investment loss reduction. Claim the deduction for the ABIL on line 21700 of your Income Tax and Benefit Return. For the 2025 tax year, enter the gross amount of your business investment loss on line 21699.

What is a business investment loss

A business investment loss results from the actual or deemed disposition of certain capital properties. It can happen when you dispose of one of the following to a person you deal with at arm's length:

• a share of a small business corporation
• a debt owed to you by a small business corporation

For business investment loss purposes, a small business corporation includes a corporation that was a small business corporation at any time during the 12 months before the disposition.

You may also have such a loss if you are deemed to have disposed of, for nil proceeds of disposition, a debt or share of a small business corporation under any of the following circumstances:

• A small business corporation owes you a debt (other than a debt from the sale of personal-use property) that is considered to be a bad debt at the end of the year
• At the end of the year, you own a share (other than a share you received as consideration from the sale of personal-use property) of a small business corporation that:
  • has gone bankrupt in the year
  • is insolvent and a winding-up order has been made in the year under the Winding-up Act
  • is insolvent at the end of the year and neither the corporation, nor a corporation it controls carries on business. Also, at that time, the share in the corporation has a fair market value of nil and it is reasonable to expect that the corporation will be dissolved or wound up and will not start to carry on business

You can elect to be deemed to have disposed of the debt or share of the small business corporation at the end of the year for nil proceeds of disposition, and to have immediately reacquired the debt or share after the end of the year at a cost equal to nil. To do this, you have to file an election with your income tax and benefit return. To make this election, attach to your return a letter signed by you. State that you want subsection 50(1) of the Income Tax Act to apply.

What happens when you incur an ABIL

You can deduct your ABIL from your other sources of income for the year. If your ABIL is more than your other sources of income for the year, include the difference as part of your non-capital loss.

Although you can generally carry a non-capital loss back three years and forward 20 years, this does not apply to a non-capital loss resulting from an ABIL. Instead, an ABIL that has not been used within 10 tax years will become a net capital loss in the eleventh year.

To carry a non-capital loss back to 2022, 2023, or 2024, complete Form T1A, Request for Loss Carryback, and include it with your 2025 Income Tax and Benefit Return (or send one to the CRA separately). Do not file an amended return for the year to which you want to apply the loss.

The unapplied part of your non-capital loss resulting from an ABIL will become a net capital loss in the eleventh year. You can use this loss to reduce your taxable capital gains in any year after.