What happens if I sell at a loss?
Sell at a Loss? Don’t panic — learn the tax moves most sellers miss.
Quick answer
Selling at a loss has two different outcomes depending on the property: if the property was your principal residence, you generally cannot claim a tax deduction. If it was an investment or rental property, you likely have a capital loss that can offset capital gains now or in future years.
What the tax rules mean in plain language
- Principal residence (home you lived in): Losses are typically not deductible on your tax return. The tax system treats your home differently.
- Investment or rental property: Losses are capital losses. You can use them to offset capital gains in the same year, carry them back up to three years (Canada) or carry them forward indefinitely. Rules differ if you’re in another country — always confirm with your accountant.
- Depreciation / CCA and recapture: If you claimed depreciation on a rental property, selling can trigger recapture rules. That can change the tax math.
Keywords: sell at a loss, capital loss, selling home at a loss, tax implications, claim capital loss.
Practical example (simple numbers)
You bought an investment property for $500,000. You sell for $450,000. You paid $15,000 in selling costs (agent fees, legal). Net proceeds = $435,000. Adjusted cost base = $500,000. Capital loss = $65,000. That $65,000 can offset capital gains this year. If you have no gains, you can carry that loss back 3 years or forward indefinitely (Canada).
If this was your principal residence, you cannot use that $65,000 to reduce your tax bill.
Actionable 4-step plan to protect yourself
- Classify the property now. Was it principal residence, rental, or investment? The tax outcome depends on this.
- Calculate accurate numbers. Gather purchase price, capital improvements, selling costs, and receipts. Net proceeds minus adjusted cost base = capital gain or loss.
- Talk to a tax pro. Ask about carrying losses back or forward, and whether depreciation recapture applies. If you’re in Canada, mention the 3-year carryback and indefinite carryforward rules.
- Consider real estate options. A market-savvy agent can help you reduce selling costs, time on market, or advise on converting a property to rental if appropriate. Poor timing doubles pain; small strategy changes can cut your loss.
When to call a professional
Tax law is technical. Use a chartered accountant or tax lawyer for final numbers. Use a local real estate expert to evaluate market alternatives before you sell.
If you want clear, local advice on minimizing your loss and understanding the tax side, contact Tony Sousa. He’s a hands-on local realtor who connects sellers with trusted tax pros and maps the smart path forward.
Contact: tony@sousasells.ca | 416-477-2620 | https://www.sousasells.ca
No fluff. No fear. Just the steps that protect your money and your next move.
