That’s a lot better than the original $5,000 tax bill you thought you would have. This amount offsets your gain, leaving only $500 to be included on your tax return ($2,500 taxable gain minus $2,000 capital loss equals $500 of investment income you are required to report on your tax return). Again, only half of the loss ($2,000, in this case) is reportable. But, if you sold the holdings at a decreased value, then you will have a realized capital loss of $4,0. This is called an unrealized capital loss as long as you continue to hold the shares. In my example, let’s assume you had other investments that have cumulatively decreased by $4,000. Similar to gains, only 50 per cent of the loss can be used to offset the gain. The income tax rules allow you to offset any capital gains with capital losses before calculating the taxes that are due. Although it may be unfortunate to have lost money, you can use the capital loss to your benefit. The corollary is that if your shares have decreased in value, then you have a capital loss. But, because capital gains are tax-preferred, only $2,500 is considered by CRA to be a taxable capital gain and the other half is tax-free. In this instance, $5,000 is the capital gain for 2021. Instead, you must pay the taxes owing by April 30 of the next year, after you file your tax return. No taxes are withheld at source (like a paycheque). If you sold the holding, then $5,000 would need to be reported on your tax return that year. Taxes are due only when you sell the investment, and it becomes a realized capital gain. If you continue to hold the shares, this is called an unrealized capital gain and no income tax is owing to CRA (Canada Revenue Agency). You bought shares in a Canadian company for $10,000 and they grew in value to $15,000. (This assumes the investment is not held in a registered account, like an RRSP or TFSA.) That is, you pay tax on only 50 per cent of the gain. This type of investment income is preferentially taxed. If you own shares in a company that have increased in value, this is called a capital gain. There is a way to use your investment losses in your favour if you get the timing right, but you’ll need to be cautious about the implementation. Is there a way I can keep my profits without sending a big chunk to the tax man?Ī: I have a tax planning strategy that might make you both happy. My spouse worries that I’ll have a huge tax bill if I sell, and this is discouraging me from acting.
I fear my winner might reverse course, so I’d like to take my money off the table. As my beloved wife reminds me, I’ve also had losses in other company shares this year. Q: I got lucky in 2021 and made a bunch of money investing in a Canadian company.