Tax-Loss Selling 2021
Penni Johnston-Gill - Nov 13, 2021
As we head towards December, investors should begin thinking about the year ahead and planning for potential tax losses. We invite you to review our Tax-Loss Selling Guide for 2021 to learn more!
Tax-loss selling in a nutshell: this strategy is the disposition of a security that is down materially year-to-date to capture the loss for beneficial tax purposes.
Heading Towards Year-end
As we head towards December, investors should begin thinking about the year ahead and planning for potential tax losses – selling their losing positions to offset capital gains. Based on Canadian tax law, capital losses can offset capital gains in any fiscal year. Losses must first be applied against capital gains in the current year; if any excess losses remain, they can be applied against capital gains made in the prior three years or be used to offset capital gains in future years.
For example, if an investor had purchased 100 shares of XYZ Corp. at $40.00 and sold it in 2020 at $20.00 a share (on a net basis, including brokerage fees), the investor would now have a capital loss of $2,000. This loss can be used to reduce certain capital gains this year by $2,000. If there are no applicable capital gains this year, then this $2,000 capital loss can be carried forward to future years, or applied against capital gains incurred in 2018, 2019, and 2020 resulting in a tax credit or refund.
Key Dates for 2021
*Wednesday, December 29th* – Mark this date on your calendar!
The last trading date for 2021 for Canadian and U.S publicly traded stocks will be Wednesday, December 29th to record the gain or loss in the 2021 taxation year. Canadian stocks purchased or sold after December 29th are settled in 2022; any capital gains or losses on sale will apply to the 2022 tax year instead of 2021. The Canadian stock exchanges, e.g., TSX, are closed on both Monday, December 27th and Tuesday, December 28th, 2021 in lieu of Christmas Day and Boxing Day respectively.
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