How to Use Tax-Loss Selling to Minimize Taxes

Allan Madan, CA
 Nov 13, 2015
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Do you own stocks, bonds, mutual funds, or other marketable securities? Are you looking to get a tax advantage from selling money losing investments? Tax-loss selling may just be the tax strategy that is right for you!

how to use tax-loss selling to minimize taxesWhen owning stocks, shares, and other types of investments, it is common to accrue losses as the market values of securities fluctuate. An accrued loss occurs when you own investments that have a market value today that is less than what you initially paid for them. These accrued losses become a tax advantage when realized, in other words when you sell them.  Realized losses can be used to offset capital gains in your portfolio. This strategy is known as Tax-loss selling.  It is especially important to realize these losses at the end of the year because if they go unrealized, you will have to pay taxes on the capital gains that you have in your portfolio.

The useful thing about capital losses is that capital losses that cannot be used in the current year may be used to offset capital gains incurred up to three years prior or it can be carried forward indefinitely to offset any future capital gains. However, in order for capital losses to be available immediately in the current year, the settlement must take place no later than December 24th of that year, so that it may be processed before the end of the year. It is important to note that if shares are purchased in a foreign currency, the gain or loss may be larger than anticipated once the exchange rate is taken into account.

So Here’s the Tip:

By using this simple tax strategy, you can strategically offset any realized capital gains.

Disclaimer

The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

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Comments 4

    1. Hi Aurelien,

      No, I do not recommend this because income earned inside a RRSP is not subject to taxation. Tax loss selling makes sense when you have realized gains from the sale of non registered investments.

  1. I have a question for you. I went through a divorce 17 years ago. But my assets were never split up. My ex-wife is asking for capital losses that I had 17 years ago. Is she entitled to any of my capital losses. And if she is what percentage is she entitled to.I had approximately $38,000 in capital losses in 2001. What do, I do thank you Joseph

    1. Hi Joseph, if she did not own the property (which resulted in capital losses), and did not report her share of the capital losses at the time they were incurred, then she is not entitled to them.

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