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Turn investment losses into deductions

Every year, December 31 is the deadline for tax-loss selling. Tax-loss selling lets you apply the amount of the capital loss from one investment against the profit from another. This reduces the tax payable on the profit. You can even recover tax paid in past years.

Selling a holding for less than you paid can create a capital loss, which offsets capital gains for the same year. Any loss that cannot be used in the current year can be carried back to offset gains in the past three years or carried forward to future years. It's your choice when to use it.

Many people who hold mutual funds* outside of a registered plan have taxable capital gains they don't even know about – yet. Mutual funds often distribute their trading gains – and tax bill – to unitholders.

Perhaps your fund made a hefty distribution in a recent year. If you have no current-year capital gains, you may be able to apply current-year capital losses against gains in the previous three years and reclaim some or all of the tax previously paid.

Bear in mind that the transaction must settle by Dec. 31 in order to qualify for the current year. In most cases, the settlement takes three business days.

Note that it is never wise to make investment decisions based solely on what the potential tax consequences might be. Professional advice on this matter is essential. Contact your BlueShore Financial financial advisor to discuss your specific situation.

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This article is provided as a general source of information and should not be considered personal financial or investment advice or solicitation. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete.

*Mutual funds are offered through Credential Asset Management Inc. Mutual funds and other securities are offered through Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual fund securities and cash balances are not insured nor guaranteed, their values change frequently and past performance may not be repeated.

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