In Canada, Investing, Money

Investing Series: How Capital Gains and Losses are treated in Canada

This is a part of the Investing Series.

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Before the end of the year (December 31st) if you divest (meaning “sell”) off your stocks that have lost money in capital, you can use those losses to offset any capital gains you may have made during the year.

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In Canada:

Capital gains are only taxed on the 50% as of 2014.

If you made $1000, you are only taxed on $500 at your current individual tax rate.

Capital losses can only claimed on the 50% of its value to lowers your taxes as of 2014.

They are also used to lower your taxable income and you can either use in that tax year or carry forward.

If you lost $1000, you can only claim $500 in losses on your taxes.


This is why a lot of investors near the end of a calendar year tend to sell off any losers in their portfolio so that they can divest of the stock, and get that 50% capital loss to apply to their individual taxes.

Capital losses (the credits) can be carried forward indefinitely. If there are still capital losses in the year of that person’s death, you can use the credits against ALL types of income (not just certain ones).

That’s it.

For more details especially on capital gains or losses on properties, go to the CRA site.


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Sherry of Save. Spend. Splurge.

I got out of $60,000 of debt in 18 months using TheBudgetingTool.com. Since then, I have worked 50% of my career (taking 1-2 year breaks), and quadrupled my income within 2 years of graduating, going from $65K to $260K (savings rate = 85%). I could retire today if I wanted, but love my work-life balance as a freelancing consultant in STEM (Science, Technology, Engineering, Math). I also post daily on Instagram @saverspender.

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2 Comments

  1. Dan @ Our Big Fat Wallet

    Good stuff. One trick to watch out for is superficial losses, where you basically sell an investment to claim the tax loss and then buy it back within 30 days. In order to claim the loss for tax purposes you need to not buy it back within 30 days

    Reply

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