How far back and forward can my client carry a net capital loss, and how do I claim it?
A 2025 net capital loss can be carried back to 2022, 2023 and 2024, or forward with no time limit. Request the carryback on Part 5 of Form T1A by the 2025 return due date. During life the loss offsets only taxable capital gains; in the year of death and the year before, it can reduce other income too.
How far back and forward can each kind of capital loss go?
A net capital loss can reduce taxable capital gains in any of the 3 previous years or in any future year, so a 2025 loss reaches back to 2022, 2023 and 2024 canada.ca. The rule is paragraph 111(1)(b) of the Income Tax Act, which sets no end date for the carryforward
laws-lois.justice.gc.ca.
| Loss | Back | Forward | What it can offset | Where you claim it |
|---|---|---|---|---|
| Net capital loss | 3 years | No limit | Taxable capital gains only | Form T1A Part 5 (back), line 25300 (forward) |
| Listed personal property loss | 3 years | 7 years | Listed personal property gains only | Form T1A (back) |
| Net capital loss, year of death and the year before | Any unused year | Not applicable | Taxable capital gains, then other income after subtracting capital gains deductions claimed | Line 25300, Form T1-ADJ for the year before death |
| ABIL unused after 10 years | Not applicable | Becomes a net capital loss in year 11 | Taxable capital gains | Line 25300 |
| Loss incurred before May 23, 1985 | As a net capital loss | No limit | Taxable capital gains, plus up to $2,000 of other income | Line 25300 |
The listed personal property and ABIL rows come from chapter 5 of the CRA capital gains guide, which also says an ABIL not used within 10 tax years becomes a net capital loss in the eleventh year canada.ca. For the ABIL itself, see allowable business investment loss. The $2,000 for old losses is on the line 25300 page
canada.ca.
Worked example: a $26,000 loss from 2025 carried back to 2022 and 2024
Your client sold shares in 2025 for a $60,000 capital loss and a fund for an $8,000 capital gain. In the three earlier years she reported taxable capital gains of $10,000 (2022), nothing (2023) and $9,000 (2024).
| Step | Amount |
|---|---|
| Allowable capital loss: $60,000 × 1/2 | $30,000 |
| Taxable capital gain in 2025: $8,000 × 1/2 | $4,000 |
| 2025 net capital loss: $30,000 less $4,000 | $26,000 |
| Carried back to 2022 | $10,000 |
| Carried back to 2023 | $0 |
| Carried back to 2024 | $9,000 |
| Left to carry forward | $7,000 |
| Claimed in 2026 against a $5,000 taxable capital gain | $5,000 |
| Still available after 2026 | $2,000 |
The loss first wipes out the 2025 gain, because allowable capital losses are netted against taxable capital gains of the same year before a net capital loss exists canada.ca. The carryback can never exceed the taxable capital gains of the year it hits, which is why 2023 takes nothing. The 2026 claim needs no adjustment: section 38 still sets the inclusion rate at one half for gains and losses
laws-lois.justice.gc.ca, and the two thirds proposal was cancelled (see capital gains inclusion rate 2026).
How do you request the carryback, and by when?
Complete Part 5 of Form T1A, Net capital loss for carryback, and send it with the loss year's return or separately. Do not file an amended return for the year that receives the loss canada.ca. Form T1A is the CRA's request to apply a current year loss to any of the three previous years
canada.ca.
The deadline is the filing due date of the loss year's return. Subsection 152(6) obliges the CRA to reassess the earlier year only when the prescribed form is filed on or before the day the return for the loss year is due laws-lois.justice.gc.ca. For a 2025 loss, that's the 2025 return's own due date (see T1 filing deadline 2026), and a later T1A falls outside that obligation.
Carryforwards have their own ordering rule. Losses of earlier years go before losses of later years, so a 2019 balance is used before a 2023 one, and each year's balance is tracked separately canada.ca. Subsection 111(3) is the source: a loss can't be deducted until the deductible losses of the same type from earlier years have been used
laws-lois.justice.gc.ca. The claim on line 25300 can't exceed the year's taxable capital gains, and Form 1436 is the CRA worksheet for the calculation.
Do older losses need an adjustment factor?
Only losses from 1988 to 2000. A net capital loss is restated to the inclusion rate of the year it is used, and every year from 2001 through 2025 used one half, so those losses carry over at face value.
| Year the loss was incurred | Inclusion rate | Adjustment factor | Readjustment factor |
|---|---|---|---|
| Before May 22, 1988 | 1/2 | 1 | 1 |
| 1988 and 1989 | 2/3 | 3/4 | 4/3 |
| 1990 to 1999 | 3/4 | 2/3 | 3/2 |
| 2000 | Variable, from the 2000 assessment | 1 ÷ (2 × 2000 rate) | 2 × 2000 rate |
| 2001 to 2025 | 1/2 | 1 | 1 |
The table is the CRA's canada.ca. In the Act it is the formula A × B/C in subparagraph 111(1.1)(a)(ii): the amount claimed, times the section 38 fraction for the year of use, divided by the fraction for the loss year
laws-lois.justice.gc.ca. So an $18,000 net capital loss from 1999 is worth $12,000 against a gain taxed at one half ($18,000 × 2/3). For the 2000 rate, check the client's 2000 notice of assessment or Represent a Client.
What changes in the year of death?
In the final return and the return for the year before death, unused net capital losses can reduce other income, not just capital gains. Subsection 111(2) rewrites the limit for those two years, and reduces the amount by every capital gains deduction the person claimed in their lifetime laws-lois.justice.gc.ca.
For a loss in the year of death, the CRA gives two methods. Method A carries the loss back on Part 5 of Form T1A against gains of the 3 prior years first; Method B skips the carryback. Take a person who died June 20, 2025 with an $11,000 net capital loss, taxable capital gains of $4,000 (2023) and $2,000 (2022), and $4,000 of capital gains deductions claimed to date canada.ca.
| Step | Method A | Method B |
|---|---|---|
| 2025 net capital loss | $11,000 | $11,000 |
| Carried back to 2023 | $4,000 | $0 |
| Carried back to 2022 | $2,000 | $0 |
| Less capital gains deductions claimed | $4,000 | $4,000 |
| Left for other income in 2025 or 2024 | $1,000 | $7,000 |
A loss used against other income in the year of death goes on line 12700 of the final return as a negative amount in brackets. To use it in the year before death, send Form T1-ADJ or a signed letter separately. The loss isn't counted in net income for social benefit repayments or credits based on net income canada.ca.
One estate trap: a net capital loss from the first year of a graduated rate estate (the first three years if the person died after August 11, 2024) can't be applied to any year before the year of death. The way to move it is a subsection 164(6) election, which takes the T3 return and then a Form T1-ADJ canada.ca. For the gains that create these losses, see deemed disposition on death.
Sources
Can a net capital loss reduce employment or business income?
Not while your client is alive. The line 25300 deduction can't exceed the year's taxable capital gains canada.ca. The exceptions are losses incurred before May 23, 1985 (up to $2,000 of other income) and the year of death and the year before, when subsection 111(2) opens other income.
Do I have to carry the loss back before carrying it forward?
No. The carryback is optional: Form T1A applies a current year loss to whichever of the three previous years you pick canada.ca. Whatever you don't carry back stays available on line 25300 in future years, oldest losses first.
Where do I find the client's unapplied net capital loss balance?
Usually on the latest notice of assessment or reassessment canada.ca. Keep a separate balance for each loss year, which matters for the ordering rule and for any loss from 1988 to 2000 that needs an adjustment factor.
Does a superficial loss create a net capital loss?
No. A superficial loss can't be deducted in the year, but it usually gets added to the adjusted cost base of the substituted property canada.ca. The superficial loss rule page covers when it applies.
General information for the tax year shown, not advice for a specific client. Confirm the facts before you file or remit.