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The stock market has gone from crashing in 2020, to soaring to new heights throughout 2021, resulting in realized capital gains for many. The ensuing pullback in 2022 has had the opposite effect.

Tax-Loss Harvesting is a strategy whereby you intentionally sell an investment for a loss in order to offset capital gains elsewhere, and recover taxes previously/otherwise paid.

Capital losses that are incurred in any tax year can be carried forward indefinitely OR can be applied to offset capital gains from the previous three tax years. By carrying losses back, you reduce tax owed for the prior year and generate a tax refund. For example, if you have $100,000 of capital losses that you trigger this year overall, and you had $100,000 of capital gains in 2021, the 2022 capital loss would carry back to 2021, and generate a refund up to $26,750.

These are Canadian tax rules.  If you are a US filer, factors are similar except that losses cannot be carried back.

You should also consider superficial loss rules which deny an immediate claim with respect to losses when a security is repurchased within 30 days.

Please reach out to your investment and tax professionals if you think that this may assist you before December 31.

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Whitey Mitchell

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The information contained in this article is for general use only and should not be viewed as professional advice. Accounting and tax rules and regulations regularly change and individuals should contact a competent professional to obtain accounting and tax advice based on their specific situation.

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