Don’t throw the baby out with the bathwater when tax-loss selling: Dale Jackson

Summary

• Investors are utilizing tax-loss selling before the 2026 year-end to lower tax bills by selling equities at a loss to offset capital gains taxes.
• Experts advise against selling investments solely for tax savings, warning that short-term slumps may hide potentially lucrative assets.
• The deadline to evaluate questionable companies is December 30, coinciding with the conclusion of third-quarter earnings season.
• Investors should avoid selling entire mutual funds or ETFs if only a few laggards are dragging down an otherwise good portfolio.
• Capital losses in 2026 can be used to recoup taxes paid on gains from the past three years or to reduce future tax liabilities.
• In non-registered accounts, half of capital gains are taxed, meaning half of capital losses can eliminate taxes on gains dollar-for-dollar.
• The inclusion rate for capital gains exceeding $250,000 annually for a single individual increases to 66.7% in 2026.
• The CRA superficial loss rule prohibits repurchasing the same stock within 30 days of a sale in the account holder's name or their spouse's name.
• To claim a capital loss, investors must wait at least 31 days before repurchasing the security; purchases 30 days before or after the sale disqualify the loss.
• Tax-loss selling does not apply to registered accounts like TFSAs or RRSPs where capital gains are never directly taxed.
• Proceeds from tax-loss selling in non-registered accounts can be shifted to registered accounts to generate further tax efficiency.
• RRSP contributions made before March 1, 2027, can be deducted from 2026 income or carried forward to future years.
• Professionals recommend consulting experts to navigate specific rules regarding tax-loss selling & registered account contributions.