Can a capital loss reduce my salary or other income?

No. A net capital loss only reduces taxable capital gains. Unused losses carry back three years on Form T1A or forward for good, but only against gains (ITA paragraph 111(1)(b)).

What is a superficial loss?

A loss that is denied because you, or an affiliated person such as your spouse or a corporation you control, bought the same or identical property within 30 days before or after the sale and still owned it 30 days after. The denied loss is added to the cost base of the repurchased property, so it is deferred, not lost.

Can I sell in my taxable account and buy the same fund in my TFSA or RRSP?

Not if you want the loss. If the registered account buys the identical property within the 30-day window, the loss is superficial, and there is no cost base inside the plan to add it to. Wait 30 days or buy something different.

Is selling one index ETF and buying another allowed?

Identical property means the same security. Two funds that track different indexes are different properties, so the loss stands. The CRA defines identical property on its capital losses page and in Guide T4037.

How much tax does a $20,000 gain cost?

Half the gain is taxable. For someone in Ontario with $150,000 of employment income, a $20,000 gain costs about $4,479 of 2026 tax. A $20,000 loss in the same year brings that to zero.

Do losses on my cottage, car or collectibles count?

No. Losses on personal-use property are denied. Losses inside a TFSA, RRSP or FHSA can never be claimed either, because gains in those plans are never taxed.

When is the deadline to sell for this tax year?

The trade must settle in the calendar year: the CRA treats a share sold on an exchange as disposed of on the settlement date (technical interpretation 2012-0468931C6). Trades settle one business day later, so for 2026 the last day to sell is Wednesday, December 30. See the year-end tax deadlines page.

Capital-loss harvesting and the superficial-loss rule (Canada, 2026)

This guide is part of Tax-saving strategies for Canadians (2026).

Who this is for

You hold investments in a non-registered account that are worth less than you paid, and you sold something else at a gain this year.

How it works

The capital gains inclusion rate is 50% for 2026. Half of a gain is added to your income, and half of a loss (the allowable capital loss) comes off your taxable gains. You use a loss in three steps:

Same year first. A loss cancels gains from the same year.
Then back three years. Any loss left over can go against gains in any of the three previous years. File Form T1A and the CRA refunds tax you already paid.
Then forward for good. Whatever is still unused carries forward to any future year, claimed on line 25300 against that year’s gains.

With no gains to cancel, selling at a loss just stores the loss for later.

Worked example: $150,000 salary plus a $20,000 gain (Ontario, 2026)

Tax uses the 2026 federal and Ontario brackets in our data files.

Line	Amount
Employment income	$150,000
Realized capital gain	$20,000
Taxable capital gain (50%)	$10,000
Marginal rate on the gain, which sits partly in the next bracket	44.79%
Tax on the gain	$4,479
Sell a losing position with a $20,000 loss in the same year	Allowable loss $10,000 cancels the taxable gain
Tax on the gain after the loss	$0

The rules that trip people up

The 30-day window runs both ways. The loss is superficial if you buy the same or identical property in the 61 days from 30 days before the sale to 30 days after, and still hold it at the end (ITA section 54).
Your spouse and your company count. Your spouse or common-law partner, and any corporation or trust you control, are affiliated persons.
Registered accounts are the worst case. Buy the same security back in your RRSP, TFSA or FHSA within the window and the loss is denied with no cost base to add it to.
Identical property. The same security is identical. A fund that tracks a different index is not.
Personal-use property. Losses on a cottage, car, boat or collectibles are denied.
Year-end timing. The trade must settle inside the year; the CRA uses the settlement date (technical interpretation 2012-0468931C6). For 2026 that means selling by Wednesday, December 30: year-end tax deadlines 2026.
The investment comes first. A loss harvested into a worse portfolio is not a saving.

What to do next

Enter your sale in the capital gains tax calculator to see the tax on the gain and what a matching loss removes. The income tax estimator gives your marginal rate and GIC vs HISA the tax on interest outside a registered plan. More strategies: Tax-saving strategies for Canadians (2026).

Questions people ask

Can a capital loss reduce my salary or other income?: No. A net capital loss only reduces taxable capital gains. Unused losses carry back three years on Form T1A or forward for good, but only against gains (ITA paragraph 111(1)(b)).
What is a superficial loss?: A loss that is denied because you, or an affiliated person such as your spouse or a corporation you control, bought the same or identical property within 30 days before or after the sale and still owned it 30 days after. The denied loss is added to the cost base of the repurchased property, so it is deferred, not lost.
Can I sell in my taxable account and buy the same fund in my TFSA or RRSP?: Not if you want the loss. If the registered account buys the identical property within the 30-day window, the loss is superficial, and there is no cost base inside the plan to add it to. Wait 30 days or buy something different.
Is selling one index ETF and buying another allowed?: Identical property means the same security. Two funds that track different indexes are different properties, so the loss stands. The CRA defines identical property on its capital losses page and in Guide T4037.
How much tax does a $20,000 gain cost?: Half the gain is taxable. For someone in Ontario with $150,000 of employment income, a $20,000 gain costs about $4,479 of 2026 tax. A $20,000 loss in the same year brings that to zero.
Do losses on my cottage, car or collectibles count?: No. Losses on personal-use property are denied. Losses inside a TFSA, RRSP or FHSA can never be claimed either, because gains in those plans are never taxed.
When is the deadline to sell for this tax year?: The trade must settle in the calendar year: the CRA treats a share sold on an exchange as disposed of on the settlement date (technical interpretation 2012-0468931C6). Trades settle one business day later, so for 2026 the last day to sell is Wednesday, December 30. See the year-end tax deadlines page.

Sources

Every figure in this guide comes from one of these primary sources, checked on October 13, 2026.