Capital Losses in Canada: How to Carry Back and Carry Forward (2025)

A capital loss feels like a setback. But in Canadian tax law, a well-used capital loss can be a powerful tool — reducing taxes paid in previous years, recovering cash you've already sent to the CRA, or offsetting future gains indefinitely.

When you have a capital loss

You have a capital loss when you sell (or are considered to have sold) a capital property for less than its ACB plus selling costs.

Capital loss = ACB + selling costs − proceeds of disposition

Capital losses can only offset capital gains — not employment income, business income, or rental income. This is the fundamental constraint.

Step 1 — Net gains and losses in the current year

First, offset all capital gains and losses within the same tax year. If you sold stocks at a $10,000 gain and a mutual fund at a $4,000 loss, your net capital gain is $6,000 for the year.

If total losses exceed total gains, you have a net capital loss for the year.

Step 2 — Apply carryforward losses

If you have net capital losses from previous years, you can claim them on line 25300 of your current return to reduce the current year's net capital gain.

Carryforward losses have no expiry date — a loss from 2005 is just as valid in 2025 as one from last year.

The only complication: if the losses were incurred when a different inclusion rate was in effect, you need to adjust them. CRA provides Form T1436 (Capital Gains Deduction Worksheet) to handle this. For most readers, all losses will be at the current 50% rate, so no adjustment is needed.

Step 3 — Carry back losses to recover prior-year taxes

If you still have a net capital loss after netting current gains and applying carryforwards, you can carry the loss back up to three years and recover taxes already paid.

• A 2025 net capital loss can offset taxable capital gains from 2024, 2023, or 2022
• You choose which year to apply it to (and in what amounts)
• The CRA reassesses the prior year and issues a refund

How to claim a carryback: File Form T1A, Request for Loss Carryback, with your 2025 T1 return. You cannot file T1A separately — it must accompany your current year return.

Use the capital loss planner to calculate how much you recover from each prior year.

The superficial loss rule — when you can't claim the loss

You cannot claim a capital loss if:

• You (or an affiliated person) repurchases the same or identical property within 30 days before or after the sale
• The result is a "superficial loss"

The denied loss is added to the ACB of the repurchased shares — it is deferred, not permanently disallowed. You will eventually recover it when you finally sell the repurchased shares without immediately rebuying.

Affiliated persons include your spouse or common-law partner, a corporation you control, and a trust in which you or an affiliated person is a majority beneficiary.

Allowable business investment losses (ABIL)

A special type of capital loss — the Allowable Business Investment Loss (ABIL) — is more flexible than an ordinary capital loss. ABILs arise from the disposition of shares or debt of a small business corporation at a loss. Unlike regular capital losses, ABILs can offset all types of income (not just capital gains), though unused ABILs eventually convert to regular capital losses.

Capital losses and RRSP/TFSA

Assets held inside an RRSP or TFSA do not produce capital gains or capital losses that you can claim on your T1. All gains inside these accounts are sheltered, but so are all losses — you cannot use in-account losses to offset gains elsewhere. This is why it is generally better to hold assets with the highest expected gains inside a TFSA, while keeping low-growth (or loss-prone) assets in a taxable account.

Reporting capital losses

All capital dispositions — including losses — must be reported on Schedule 3. Net capital losses carried forward are tracked by the CRA and visible in your My Account portal. If you're unsure of your balance, call the CRA or log in to check.

Related guides and tools

• Capital Loss Planner
• Canadian Capital Gains Tax Calculator
• How Capital Gains Tax Works in Canada (2025)
• Capital Gains Inclusion Rate — History & 2025
• How to Calculate Adjusted Cost Base (ACB)
• Capital Gains Tax on Crypto in Canada