As year-end approaches, investors may consider selling an investment that has declined in value to offset capital gains realized during 2026.
That can be legitimate tax planning—but Canada’s superficial-loss rule can deny the loss if the investment is repurchased too soon.
How the rule works
A loss may be superficial when:
• You dispose of a capital property at a loss;
• You—or an affiliated person—acquire the same or an identical property during the period beginning 30 days before and ending 30 days after the sale; and
• You or the affiliated person still own, or have a right to acquire, that property at the end of the period.
An affiliated person generally includes a spouse or common-law partner. Purchases in accounts or entities connected to you may also need review. canada.ca
If the rule applies, the loss cannot be deducted immediately. Where the replacement property is held in a taxable account by the person who acquired it, the denied loss is generally added to that property’s adjusted cost base, potentially deferring the benefit until a later sale. canada.ca
The registered-account trap
Be especially careful about selling shares in a non-registered account and repurchasing them inside your TFSA or RRSP. The superficial-loss rule may apply, while the registered account generally cannot use an adjusted-cost-base increase—potentially making the tax benefit unavailable.
Losses arising inside a TFSA are not deductible. A decline in TFSA value also does not restore contribution room. Canada.ca
Why plan before December?
Capital losses generally offset capital gains—not employment, pension or interest income. An unused net capital loss may generally be carried back three years or carried forward indefinitely against taxable capital gains. Net capital losses of other years
Before selling, review:
✅ Realized gains for 2026
✅ Purchases made during the preceding 30 days
✅ Planned repurchases during the following 30 days
✅ Spousal, corporate and registered accounts
✅ Correct adjusted cost base, including foreign-currency transactions
✅ Transaction and settlement timing
Tax-loss selling should support your investment plan—not create a rushed investment decision purely for tax purposes.
AsraniCPA – Your Trusted Accountant
