Have you incurred losses on your crypto assets? You may be able to recover some of the income tax paid in previous years by requesting a tax loss carryback.
In Canada and Quebec, net capital losses and non-capital losses can be carried back to the three preceding taxation years. How these losses can be used depends on their tax classification and the income reported in those years.
This guide explains the eligible losses, carryback periods, and filing procedures with the Canada Revenue Agency (CRA) and Revenu Québec for both individuals and corporations.
1. Which Crypto Asset Losses Can Be Carried Back?
Before requesting a carryback, you must determine whether the loss is recognized for tax purposes and whether it is treated as a capital loss or a business loss.
Capital Losses
When a taxpayer holds crypto assets as capital property, a capital loss may arise when they:
- Sell a crypto asset for less than its adjusted cost base (ACB), taking into account the expenses incurred to make the sale;
- Exchange one crypto asset for another and realize a loss on the asset disposed of;
- Use a crypto asset to pay for goods or services and realize a loss on its disposition.
A decrease in the market value of a crypto asset, on its own, does not result in a capital loss. An actual or deemed disposition must occur under the applicable tax rules.
The superficial loss rules may also prevent the immediate deduction of certain losses when identical property is acquired by the taxpayer or an affiliated person within the periods prescribed by law.
See the CRA's guidance on crypto asset dispositions and its Capital Gains Guide.
Business Losses
When a taxpayer trades crypto assets as part of a business, profits and losses are calculated under the rules applicable to business income.
Unlike capital property, crypto assets held as inventory may, in certain circumstances, be valued for tax purposes at an amount below their acquisition cost, even if they have not been sold.
At the federal level, subsection 10(1) of the Income Tax Act provides for inventory to be valued at the lower of its acquisition cost and fair market value, determined for each item. Alternatively, section 1801 of the Income Tax Regulations permits the entire inventory to be valued at fair market value. The chosen method must be applied consistently in subsequent years unless the Minister approves a change.
However, subsection 10(1.01) provides an exception for property held as inventory in an adventure or concern in the nature of trade: such property must be valued at its acquisition cost. Sections 83 and 83.0.1 of Quebec's Taxation Act and section 83R1 of Quebec's Regulation respecting the Taxation Act contain corresponding rules.
2. What Are the Loss Carryback and Carryforward Periods?
The two main categories of losses applicable to crypto assets are subject to different rules.
| Type of loss | Carryback period | Carryforward period | Income that can be offset |
|---|---|---|---|
| Net capital loss | 3 years | Indefinitely | Net taxable capital gains |
| Non-capital loss | 3 years | 20 years for losses incurred after 2005 | Taxable income from different sources, subject to applicable restrictions |
These rules are set out in section 111 of the Income Tax Act and sections 727 to 737 of Quebec's Taxation Act.
A loss incurred in 2025 could therefore be carried back to 2022, 2023, or 2024, provided the applicable conditions are met.
For corporations, the three preceding years refer to their three previous taxation years, which do not necessarily correspond to calendar years.
Carrying Back Net Capital Losses
Allowable capital losses incurred in a year must first be applied against taxable capital gains realized in that same year.
If an excess remains, it may constitute a net capital loss available for carryback or carryforward, subject to the adjustments prescribed by law.
A net capital loss can be used to offset taxable capital gains from previous or future years. It cannot offset employment or business income, except in certain circumstances, including upon death, when net capital losses may, subject to specific conditions, be deducted against income from other sources in the year of death or the preceding year.
Carrying Back Non-Capital Losses
A business loss arising from crypto asset activities first reduces income earned in the year the loss is incurred, including income from other sources, such as employment. If the loss is not fully absorbed, the remaining amount may constitute a non-capital loss available for carryback or carryforward, after the applicable tax adjustments.
For instance, an individual who incurs a $15,000 business loss and earns $25,000 in employment income in the same year fully uses the business loss to reduce their income for that year. No loss remains available for carryback or carryforward.
Conversely, an available non-capital loss can be carried to eligible taxation years to reduce taxable income, including employment income. See Chapter 5 of the CRA's Guide T4002, dealing with losses.
3. Examples of Loss Carrybacks
Example 1 — Carrying Back a Capital Loss from 2025 to 2024
An individual residing in Quebec holds crypto assets as capital property.
Their results are as follows:
| 2024 | 2025 | |
|---|---|---|
| Capital gains realized | $10,000 | $2,000 |
| Capital losses realized | $0 | ($12,000) |
| Net result | $10,000 | ($10,000) |
| Tax result, at a 50% inclusion rate | Taxable capital gain of $5,000 | Net capital loss of $5,000 |
The individual can request to carry back their $5,000 net capital loss from 2025 to 2024.
This deduction would fully offset the $5,000 of taxable capital gains reported for 2024.
However, the resulting tax refund would not equal $5,000. It would depend on the income tax applicable to the reduced taxable income, other deductions and credits, and the reassessed tax liability.
At the federal level, carrying back a net capital loss reduces taxable income for the previous year without changing the net income used to calculate certain tax credits and benefits.
In Quebec, the carryback may also affect the calculation of the adjustment of investment expenses, particularly under Schedule N.
This example assumes there are no other capital gains or losses, no previously carried-forward losses, and no special adjustments. The 50% inclusion rate applied to both 2024 and 2025. When the inclusion rates differ between the years involved, the losses carried back may require an adjustment.
Example 2 — Carrying Back a Business Loss
An individual carries on a business involving the trading of crypto assets.
In 2025, they incur:
- A business loss of $40,000;
- Employment income of $15,000.
Assuming the individual has no other income or special tax adjustments, the business loss first offsets their employment income for 2025.
They therefore have a non-capital loss of $25,000 remaining.
If their taxable income for 2024 was $30,000, they could request to carry back the $25,000 loss to that year, reducing their taxable income to $5,000, subject to the applicable rules.
They could also choose to carry back the loss to another eligible year or use only part of it, depending on their tax circumstances.
4. Can You Choose Which Year to Carry a Loss Back To?
Yes. A taxpayer can carry a loss back to one or more of the three preceding taxation years without having to apply it to the earliest year first.
However, when losses of the same type are available from multiple years, losses from earlier years must be used before those from later years, in accordance with paragraph 111(3)(b) of the Income Tax Act and section 735 of Quebec's Taxation Act.
5. Which Forms Are Required to Request a Loss Carryback?
The filing procedures differ for individuals and corporations.
| Taxpayer | Federal | Quebec |
|---|---|---|
| Individual | T1A — Request for Loss Carryback | TP-1012.A-V — Carry-Back of a Loss |
| Corporation | Schedule 4 of the T2 — Corporation Loss Continuity and Application | CO-1012 — Application by a Corporation to Carry Back a Loss; CO-17S.4 for loss continuity |
Individuals: T1A and TP-1012.A-V
Federal
Form T1A allows taxpayers to request that a net capital loss or non-capital loss be carried back to one or more of the three preceding taxation years.
The form can be submitted with the income tax return for the year in which the loss was incurred or separately, depending on the filing method used.
There is no need to file amended T1 returns for the previous years covered by the request.
Quebec
Form TP-1012.A-V allows individuals to request the carryback of an eligible loss.
Revenu Québec requires this form to be filed separately from the income tax return, within the deadline specified in the instructions for the applicable version.
Losses available for carryback must be calculated separately for federal and Quebec income tax purposes. Although the rules are similar, the available amounts may differ.
Corporations: Schedule 4 of the T2, CO-1012, and CO-17S.4
Federal
Corporations use Schedule 4 of the T2 to calculate and track certain tax losses and request their application to prior taxation years.
The schedule can be submitted with the T2 return for the loss year or separately, in accordance with the CRA's filing procedures.
Quebec
Form CO-1012 allows a corporation to request that an eligible loss be carried back to one or more of its three preceding taxation years.
Schedule CO-17S.4 — Loss Schedule is used instead to report loss continuity as part of the CO-17 corporation income tax return.
Revenu Québec does not provide a standardized version of this schedule but specifies the information it must contain in its CO-17.G guide.
Corporations must also consider restrictions that may arise from an acquisition of control, an amalgamation, or a reorganization.
6. What Are the Deadlines for Requesting a Loss Carryback?
Two distinct periods must be considered:
- The carryback period, which determines the years to which a loss can be applied;
- The filing deadline, which determines when the tax authority is required or permitted to process the carryback request.
The fact that a loss can be carried back three years does not mean that the request can be filed at any time.
Federal
Subsection 152(6) of the Income Tax Act provides for a mandatory reassessment when an eligible request is made on the prescribed form no later than the filing due date for the return for the year in which the loss was incurred.
However, a request submitted after that deadline is not necessarily invalid.
The CRA's Income Tax Audit Manual, Chapter 11 describes an administrative policy allowing certain late requests to be processed, subject in particular to the reassessment time limits set out in paragraph 152(4)(b).
This administrative policy is distinct from the statutory right to reassessment under subsection 152(6).
Quebec
For individuals, the instructions for Form TP-1012.A-V require the form to be submitted within the deadline for filing the income tax return for the year in which the loss was incurred.
For corporations, the CO-17.G guide indicates that Form CO-1012 must be submitted before the filing deadline for the return for the year in which the loss was incurred.
This filing deadline is six months after the end of the corporation's taxation year.
Late requests must be assessed separately. The administrative relief available from the CRA should not be assumed to apply automatically to Revenu Québec.
Example: Losses Incurred in 2025
For 2025 individual income tax returns, the regular filing deadlines were:
- April 30, 2026, for most individuals;
- June 15, 2026, for self-employed individuals and their spouses who qualify for the extended filing deadline.
These deadlines have now passed. Taxpayers wishing to request a loss carryback for 2025 should therefore verify the possibility of having a late request processed by each tax authority, based on their circumstances.
Finally, carrying back a loss does not, by itself, cancel a late-filing penalty applicable to a previous taxation year.
7. What Should Be Verified Before Requesting a Carryback?
Before submitting a request, taxpayers should:
- Determine the tax classification of their transactions: capital property, inventory, or transactions requiring further analysis;
- Reconstruct their tax results: transactions, ACB, inventory costs, fees, and currency conversions required for the relevant taxation years; [17]
- Review applicable restrictions: superficial losses, affiliated persons, and transactions with uncertain tax treatment;
- Calculate the actual loss available for carryback after accounting for other income, deductions, and adjustments;
- Reconcile loss balances with previous tax returns, schedules, and notices of assessment;
- Compare eligible taxation years to determine the amounts to carry back and potential tax savings;
- Verify filing deadlines and, for corporations, any restrictions arising from an acquisition of control or reorganization.
Exchange and wallet transaction histories, tax calculations, previous tax returns, and notices of assessment should be retained to substantiate the losses claimed.
8. Need Help Carrying Back Your Crypto Asset Losses?
Token Expert assists individuals and corporations with reconstructing their crypto asset transactions, calculating tax losses, and preparing the information required for carryback requests with the CRA and Revenu Québec.
Contact our team to explore your options for recovering some of the income tax paid in previous years.
References Consulted
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Canada. Income Tax Act, sections 10, 111, and 152, and Income Tax Regulations, section 1801.
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Quebec. Taxation Act, sections 83, 83.0.1, and 727 to 737, and Regulation respecting the Taxation Act, section 83R1.
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Canada Revenue Agency. Reporting income from crypto-asset transactions.
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Canada Revenue Agency. T4037 — Capital Gains.
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Canada Revenue Agency. T4002 — Self-employed Business, Professional, Commission, Farming, and Fishing Income, Chapter 5: Losses.
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Canada Revenue Agency. T1A — Request for Loss Carryback.
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Revenu Québec. TP-1012.A-V — Carry-Back of a Loss.
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Canada Revenue Agency. T2SCH4 — Corporation Loss Continuity and Application.
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Revenu Québec. CO-1012 — Application by a Corporation to Carry Back a Loss (English courtesy translation, CO-1012-T).
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Revenu Québec. CO-17.G — Guide to the Corporation Income Tax Return (in French).
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Canada Revenue Agency. Income Tax Audit Manual, Chapter 11 — Loss Carrybacks and Reassessments.
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Revenu Québec. Line 276 — Adjustment of Deductions.
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Canada Revenue Agency. Filing due dates for the 2025 tax return.
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Revenu Québec. The 2025 Tax Filing Season Officially Begins, February 23, 2026 (in French).
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Canada Revenue Agency. Net Capital Losses — Prepare Tax Returns for Someone Who Died.
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Ministère des Finances du Québec. Tax Expenditures — Carryover of Capital Losses (in French).
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Canada Revenue Agency. Income Tax Folio S5-F4-C1 — Income Tax Reporting Currency. Paragraphs 1.56–1.59.
Disclaimer
This article is provided for informational purposes only and does not constitute tax, accounting or legal advice. The applicable treatment depends on the facts and the taxpayer's circumstances. Tax rules and filing requirements must be verified for the relevant taxation year.
Last reviewed: October 23, 2026.
