If you want to trigger tax losses for 2014, the deadline is rapidly approaching. Because you need three business days to settle trades, waiting until next week will be too late.
Wednesday, Dec. 24 is the last day of 2014 Canadians can harvest tax losses on Canadian stocks that will offset capital gains elsewhere. Obviously, Dec. 25 is a holiday. Friday, Dec. 26 is the last day for tax-loss selling of U.S. stock for Canadian investors. Only Americans have until Dec. 31 to sell Canadian and U.S. stocks for tax-loss selling.
Since 2014 was a good year for the stock market, you may be hard pressed to find many losers, unless you have a portfolio heavily weighted in resource stocks. Remember too, that tax-loss harvesting applies only to taxable or “non-registered” portfolios. There is little point in crystallizing losses in RRSPs or TFSAs.
Ideally, you have already asked your brokerage for a list of your realized capital gains for 2014 on investments you sold: including stocks or exchange-traded funds. Don’t forget mutual fund year-end distributions.
Your goal should be to be tax neutral. So if you triggered some capital gains on a few winners earlier in the year and didn’t sell a comparable number of losers, you really should act by Wednesday. Once you have a “net” total of capital gains over losses for the year, half of those will be taxable for the 2014 tax year, which you can file by April 2015.
According to David Christianson, a financial adviser with Christianson Wealth Advisors and a vice-president with National Bank Financial Wealth Management, net losses realized in 2014 can also be carried back to offset gains claimed in any of the previous three tax years. You must file a T1A Request for Loss Carryback when you file your 2014 return. He adds that if you still want to own the stock or fund, you can buy it back 31 days later.
Other tax-related deadlines can wait till Dec. 31, including planned withdrawals from TFSAs, which can be redeposited in 2015. Christianson says if you wait until January, 2015 to withdraw money from a TFSA, you must wait until 2016 before replacing the money in the TFSA.
Dec. 31 is also the deadline for alimony and maintenance payments, medical expenses, child-care expenses, child fitness and artistic activity fees, public transit passes, moving expenses, political contributions, investment counsel fees.