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A capital loss can wipe out capital gains, but it can’t touch your salary. That catches a lot of people. You can apply a net capital loss against taxable capital gains in any of the three years before the loss, or in any year after it, with no end date.
How does a capital loss work on your return?
You have a capital loss when you sell something for less than you paid for it, counting your selling costs. Shares, units of a fund and a rental property are the usual examples. Only a set share of the loss counts. That share is the inclusion rate, and the same rate applies to gains, so a gain and a loss of the same size cancel out.
When the allowable losses for a year are bigger than the taxable gains, the leftover is a net capital loss. You don’t lose it. You park it, and you use it later through line 25300 of your return, after filling in Schedule 3 so the CRA has it on record. The CRA’s own page on capital losses and deductions sets out the same steps.
What is the rate today? The CRA page says the inclusion rate for 2025 is 50%, and it was 50% for 2001 to 2025 in the pages we read. The plan to lift it to two-thirds was cancelled in the Prime Minister’s release of 21 March 2025. Nothing we found gives a different 2026 rate, so the examples here use 50%. Check the CRA page before you rely on it.
Where can a capital loss be used?
| Question | What the CRA says |
|---|---|
| Against what income? | Taxable capital gains only |
| Carry back | 3 earlier years, using Form T1A |
| Carry forward | No time limit |
| Personal-use property, such as a car | Losses are generally not allowed |
| Listed personal property, such as art | Only against gains on the same kind of property, 3 years back and 7 forward |
| Same property bought back within 30 days | May be a superficial loss and denied |
Older losses get used first. If the inclusion rate was different in the year of the loss, you adjust the loss to the current rate on the CRA worksheet.
What is a capital loss worth? A worked example
Say Priya lives in Ontario and has $80,000 of other taxable income. She sells shares for $30,000 that cost $20,000. The capital gains tax calculator puts the extra tax on that $10,000 gain at $1,482.50.
Now add a loss. Another holding she sold for $4,000 less than she paid brings the net gain down to $6,000. On the same calculator the extra tax drops to $889.50. So the $4,000 loss saved her $593, a few hundred bucks, about 15 cents per dollar lost.
That number is the whole point. A loss is a small consolation, not a rescue. Priya gave up $4,000 to save $593, and she’d still be better off if the shares had never dropped.
Is it worth selling at a loss to save tax?
Rarely on its own. If you still like the investment, selling it just to lock in a loss means you’re out of it, and buying it straight back can trigger the 30-day superficial loss rule. That rule applies when you, or someone affiliated with you, such as a spouse or a company you control, buys the same property within 30 days before or after the sale.
It makes sense when you were going to sell anyway. Then the loss is a bonus, and you can match it against a gain in the same year. If you’ve never had a gain, the loss still counts later. If gains are coming from a big sale, the RRSP calculator shows a separate way to cut that year’s tax.
What if I had no gains this year?
You still report the loss. Nothing is refunded right away, because there’s no tax on a gain to offset. The loss turns into a net capital loss, sits on the CRA’s records, and waits for a year when you sell something at a profit. It doesn’t expire, so a loss from a bad year can be useful a decade on.
You can also go backward. If you paid tax on a gain two years ago and have a loss now, a loss carryback request on Form T1A can pull some of that tax back as a refund.
Mistakes that cost people the loss
The big one is not reporting it. If you sold at a loss and had no gain, file Schedule 3 anyway. The CRA says to attach it so the net capital loss is on its records and ready for a future year.
Next is mixing up the calculator with the tax return. Our tool shows tax only on a gain. It doesn’t track carry-forward losses, and it leaves out your main home. The lifetime exemption on some small business and farm shares is an option you switch on. Use it for a quick estimate, then use your slips and Schedule 3 for the real figures. You can also run the gain through the income tax calculator for a fuller picture of your year.
A third slip: forgetting selling costs. Broker commissions and legal fees go into the calculation, and they can turn a small gain into a small loss.
Where this information comes from
The carry-back and carry-forward rules, the personal-use property rules and the superficial loss rule come from the Canada Revenue Agency pages on capital losses, line 25300 and Schedule 3, for 2025 returns. Tax figures come from the 2026 federal and Ontario brackets in our calculators. The two-thirds cancellation comes from the Prime Minister’s release of 21 March 2025. This is an independent guide and has no link to the CRA or any government body.
Frequently asked questions
Can a capital loss reduce my salary income?
No. A net capital loss can only be applied to taxable capital gains. The CRA makes a narrow exception for some losses from before 1985.
How long can I carry a capital loss forward?
There is no time limit. You can also carry it back three years with Form T1A.
Do I report a capital loss if I had no gains?
Yes. The CRA says to complete Schedule 3 and attach it to your return so the net capital loss is on record for later years.
Can I claim a loss on my car or furniture?
Generally not. The CRA does not allow losses on personal-use property, apart from rare exceptions.
What is a superficial loss?
It is a loss the CRA denies when you or an affiliated person buys the same property within 30 days before or after the sale.
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