Selling a loser for the tax loss? The 30-day rule can cancel it
Tax-loss selling only works if the CRA lets you keep the loss. Here's the superficial loss rule, the spouse and TFSA traps, and a worked example of what a $10,000 loss is actually worth.
Tax-loss selling is simple on paper: sell an investment that's down, use the loss to cancel capital gains, pay less tax. The part people skip is the rule that can quietly deny the whole loss — and it's easy to trip with a single click.
What a capital loss is worth
A capital loss offsets capital gains dollar for dollar. Because only half of a gain is taxable (the 50% inclusion rate), the tax value of a loss is roughly half of it times your marginal rate.
- A $10,000 loss cancels $10,000 of gains, which would have added $5,000 to your taxable income.
- At a 40% marginal rate, that's about $2,000 of tax saved.
Losses can't offset salary, rent, or business income. If you have no gains this year, the loss isn't wasted: carry it back up to three years (file a T1A to get tax from earlier years refunded) or forward indefinitely.
The tax saved is a fraction of the loss. Don't sell something you'd otherwise hold just to book it — the point is to cancel gains you actually have, or to reposition a holding you wanted out of anyway.
The superficial loss rule
The CRA denies your loss if both of these are true:
- You (or an affiliated person) buy the same or an identical security during the period from 30 days before to 30 days after the sale — a 61-day window counting the sale day.
- You or that person still own it at the end of the 30 days after.
Affiliated persons include your spouse or common-law partner, a corporation you control, and certain trusts. Your RRSP and TFSA are treated the same way. Parents and adult children are not.
That creates the classic traps:
- Auto-reinvesting dividends or a pre-authorized purchase that buys more of the stock inside the window.
- Your spouse buying it in their account, or you buying it inside your TFSA or RRSP the next day.
- Selling only part of a position while still holding identical shares.
What happens if you trip it
It depends on where the repurchase happens:
- Non-registered account: the denied loss isn't gone — it's added to the cost base of the new shares. You've deferred the benefit, not lost it.
- TFSA or RRSP (or spouse): the loss is permanently denied. This is the costly one, because no cost base absorbs it.
A worked example
You sell a stock at a $10,000 loss and have $10,000 of gains from selling a rental-property stake this year. The loss cancels the gain: no capital gains tax on the sale.
Now suppose you rebuy the same stock in your TFSA two weeks later. The loss is denied, the gain is taxed, and you've paid roughly $2,000 (at a 40% rate) for the privilege of changing accounts.
How to do it cleanly
- Mind the calendar. Under T+1 settlement, a sale on December 30 settles in 2026; a December 31 sale settles in 2027.
- Wait 31 days before buying the same security back — and keep automatic purchases and your spouse's accounts in mind.
- Stay invested another way. A different fund that tracks a different index avoids the "identical" test, but confirm with a tax professional.
- Use real numbers. Your marginal rate decides the payoff — the take-home pay calculator shows where your bracket sits, and net worth by age is a useful check that the portfolio you're trimming is a meaningful part of the picture.
This is general information, not tax advice — the rule has edge cases (identical securities, partial sales, trusts) worth a quick call to an accountant before you sell.
Tax rules per the Income Tax Act's superficial loss provisions (s. 54); see CRA guidance on capital losses. Calculators at Metrestick.