Tax Loss Selling 2018

Elaine Crook - Dec 17, 2018
Heading Towards Year-End As we progress through November, investors should begin thinking about the year ahead and planning for potential tax losses - selling their losing positions to offset capital gains.

Tax-Loss Selling 2018: 'Tis The Season

 

Heading Towards Year-End

As we progress through November, investors should begin thinking about the year ahead and planning for potential tax losses - selling their losing positions to offset capital gains. Based on Canadian tax law, capital losses can offset capital gains in any fiscal year. Losses must first be applied against capital gains in the current year; if any excess losses remain, they can be applied against capital gains made in the prior three years, or be used to offset capital gains in future years.

 

But Remember...

Capital-loss selling cannot be applied to registered accounts, such as Registered Retirement Savings Plans (RRSP), Registered Educational Savings Plans (RESP), Registered Retirement Income Fund (RRIF), or Tax-Free Savings Accounts (TFSA). As well, capital losses will be foregone when you transfer a losing position from a non-registered account into a registered account. If you are selling stock at a loss, you (and your spouse/common-law partner) must wait at least 30 days before repurchasing the same securities to avoid Canada Revenue Agency's (CRA) "superficial loss" regulations. If you repurchase the shares within this 30-day window, CRA will determine that the trade was a "superficial loss", and you will be denied the benefits of the transaction. Given the complexity of tax laws, consult your Investment Advisor before considering any tax-loss related strategies.

 

Waiting Until Next Year?

If you are selling securities at a profit in 2018, should you consider waiting until 2019 to make the sale? Waiting until the New Year to sell profitable positions will defer the payment of your taxes by a full year. Your taxes for 2018 won't be due until you file your tax return in April, 2019. Caveat Emptor: Not wanting to pay tax in the current year may well be one of the worst reasons not to crystalize a capital gain.

 

Key dates for 2018
*Thursday, December 27th* – Mark this date on your calendar!

  • The last trading date for 2018 for Canadian and U.S publicly traded stocks will be Thursday, December 27th to record the gain or loss in the 2018 taxation year.
  • Canadian stocks purchased or sold after December 27th are settled in 2019; any capital gains or losses on sale will apply to the 2019 tax year instead of 2018.
  • The Canadian stock exchanges, e.g., TSX, are closed on both Christmas Day (Tuesday, December 25th, 2018) and Boxing Day (Wednesday, December 26th, 2018).
  • The U.S. stock exchanges, e.g., NASDAQ, are not closed for Boxing Day.

We highlight in the attached report:

  • Tax-Loss Selling Is Concentrated
  • The Art of Window Dressing
  • S&P/TSX Sector Performance - Best to Worst
  • S&P/TSX Composite Index Best & Worst Performers
  • S&P/TSX 60 Best & Worst Performers
  • Dow Jones Industrial Average Best & Worst Performers
  • S&P 500 Index Best & Worst Performers
  • Tax-Loss Selling with ETFs
  • Switch/Upgrade Ideas

Click here for the full report