Q&A: Capital Losses

Suppose you lose money on a stock investment. Do you need to declare that on your tax return?

Q – Is it illegal to not declare a capital loss on your tax return? I would assume the CRA wouldn’t mind insofar as it’s to the taxpayer’s disadvantage, not theirs. – Jim B., Toronto

A – I’m not a lawyer but I can see no reason why the Canada Revenue Agency would insist you declare a capital loss. However, I find myself wondering why you wouldn’t do so. A loss does not have to be used in the year it is declared. As a general rule, you can carry it back three years to reduce any taxable capital gains you declared, and thereby generate a refund. Or you can carry it forward indefinitely and use it when you wish. – G.P.