Superficial Loss Rules in Canada: How the 30-Day Rule Can Wipe Out Your Tax Loss

You sell a stock at a loss. You want to use that loss to offset a capital gain. Then — because you still believe in the investment — you buy it back a week later. Logical, right?

Not from the CRA's perspective. Under Canada's superficial loss rule, that manoeuvre disallows your capital loss entirely. The loss does not disappear permanently, but it is denied for the year you need it — which can be a very expensive oversight during year-end tax planning.

This article explains exactly how Canada's superficial loss rule works, who it applies to, and how to avoid tripping over it.

What Is a Superficial Loss?

A superficial loss arises when all three of the following conditions are met:

1. You dispose of a capital property at a loss.
2. The same property (or an identical property) is acquired — by you or by an affiliated person — in the period beginning 30 days before the sale and ending 30 days after the sale.
3. You (or the affiliated person) still hold the repurchased property at the end of that 61-day window.

When these three conditions are met, the loss is a "superficial loss" and is denied in the year of sale.

Why Does This Rule Exist?

The superficial loss rule is Canada's equivalent of the "wash-sale" rules used in other jurisdictions. Its purpose is to prevent investors from selling an asset at a loss purely for the tax benefit, then immediately buying it back to maintain their economic exposure. Without the rule, you could harvest a tax loss while never actually changing your investment position — effectively creating tax deductions out of thin air.

The 61-Day Window Explained

Many investors think of this as the "30-day rule," but the window is actually 61 days in total:

• 30 days before the sale date
• The day of sale
• 30 days after the sale date

You must not acquire an identical property at any point during that 61-day period and still hold it at the end. If you sold on December 15 to crystallise a loss before year-end and bought back on January 5, you are safely outside the 30-day post-sale window — but if you also bought shares of the same company on November 20 (before the sale), you may still be caught.

Who Is an "Affiliated Person"?

This is where the rule catches many investors off guard. The superficial loss denial applies not just to your own repurchases, but also if the property is acquired by an affiliated person. Affiliated persons include:

• Your spouse or common-law partner
• A corporation you control
• A corporation controlled by your spouse

This means: if you sell shares at a loss in your non-registered account and your spouse buys the same shares in their account within the 30-day window, your loss is a superficial loss. The same result follows if you sell in your personal account and your holding company purchases the shares.

What Happens to the Denied Loss?

The superficial loss is not permanently lost. Instead, it is added to the ACB of the repurchased identical property. This means the loss is deferred — it will eventually be recovered when the repurchased property is sold (assuming it is not another superficial loss situation).

Example:

• You own 200 shares with an ACB of $10,000.
• You sell them for $7,000 — a $3,000 loss.
• Ten days later you buy 200 shares of the same company for $7,200.
• The $3,000 superficial loss is denied and added to the ACB of the new shares: their ACB becomes $7,200 + $3,000 = $10,200.
• When you eventually sell those shares, your gain or loss is calculated from the $10,200 ACB.

The RRSP/TFSA Trap

One of the most dangerous iterations of the superficial loss rule involves registered accounts. If you sell shares in a non-registered account at a loss and the same shares are purchased inside your RRSP or TFSA within the 61-day window, your loss is still a superficial loss — and it is permanently denied.

Why permanently? Because the repurchased property is inside a registered account. The denied loss would normally be added to the ACB of the repurchased shares — but ACB inside a registered account is irrelevant (gains and losses are sheltered). The loss simply disappears with no future recovery mechanism.

This is a trap that catches investors who are simultaneously doing year-end tax-loss harvesting in a non-registered account while making contributions or reinvestments inside a registered account.

Strategies to Avoid Superficial Losses

• Wait the full 30 days after selling before repurchasing the same security.
• During the waiting period, consider buying a similar but not identical security — for example, a different ETF that tracks the same index but is not legally identical. This maintains your market exposure while keeping you clear of the rule. Be cautious: the CRA may consider some substitutes "identical" depending on the circumstances.
• Coordinate with your spouse if both of you are investing in the same securities.
• Do not sell in a non-registered account and buy back in a registered account (RRSP/TFSA) within the window.

Frequently asked questions