How do you use a capital loss?
You have a capital loss when you sell, or are considered to have sold, a capital property for less than its adjusted cost base plus the outlays and expenses involved in selling the property.
For information on calculating your capital gain or loss, see Calculating your capital gain or loss.
Generally, if you had an allowable capital loss in a year, you have to apply it against your taxable capital gain for that year. If you still have a loss, it becomes part of the computation of your net capital loss for the year. You can use a net capital loss to reduce your taxable capital gain in any of the three preceding years or in any future year.
Our Summary of loss application rules chart indicates the rules and annual deduction limit for each type of capital loss.
In 2022, Leah sold two different securities, which resulted in a taxable capital gain of $300 (1/2 x $600) and an allowable capital loss of $500 (1/2 x $1,000). After applying her allowable capital loss against her taxable capital gain, Leah has $200 ($500 – $300) of unapplied allowable capital losses.
While she cannot deduct the $200 from other sources of income in 2022, the $200 becomes part of the computation of her net capital loss for 2022. She can apply the net capital loss against her taxable capital gains in any of the three preceding years or in any future year.
Leah completes Schedule 3 and attaches it to her 2022 income tax and benefit return. This will make sure that her net capital loss is updated on CRA's records.
When determining your capital losses, special rules apply if you disposed of any of the following:
The rate used to determine "taxable capital gains" and "allowable capital losses," called an inclusion rate (IR), has changed over the years. As a result, the amount of net capital losses of other years that you can claim against your taxable capital gain depends on the IR that was in effect when the loss and the gain were incurred. Also, the way you apply these losses may differ if you incurred them before May 23, 1985. For more information, see How do you apply your net capital losses of other years to 2022?.
If you had a capital loss or gain in 2022, you must complete Schedule 3, Capital Gains (or Losses).
|Period net capital loss incurred||Inclusion Rate|
|Before May 23, 1985||1/2 (50%)|
|After May 22, 1985, and before 1988||1/2 (50%)|
|In 1988 and 1989||2/3 (66.6666%)|
|From 1990 to 1999||3/4 (75%)|
|From 2001 to 2022||1/2 (50%)|
* This rate is from line 16 in part 4 of Schedule 3 for 2000, or from your notice of assessment or latest notice of reassessment for 2000.
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