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From UFile's tax expert Gerry Vittoratos.

Carryforwards - The forgotten tax tool

Jan 27, 2023 by Gerry Vittoratos
The Income Tax Act provides for many credits and deductions to help reduce your tax payable. There is one tool in particular which is very powerful in doing that, but often forgotten: the carryforward. What is it, and how is it used? Let’s find out.

What are carryforwards?

Carryforwards are deductions and credits that you can set aside for future use if you don’t need them to reduce your tax payable in the current year. For example, if you managed to bring your tax payable down to zero with only a portion of your deductions and credits available, the remainder can be “banked” (carried forward) for use in a future year. These deductions and credits will then be at your disposal to apply against your tax payable.

It’s like having a “tax bank” where you can deposit deductions and credits for an upcoming tax bill.

What deductions and credits can I carry forward?

Here are some of the deductions and credits you can bank for future years:

Note that some can be carried forward to future years even if it would be advantageous to use them right away (RRSP, donations), while others must be used when available and only the excess amount can be banked, if any (tuition fees, capital losses).

How can I find out if I have any carryforwards available ?

The best way to find out what carryforward amounts you have in your tax bank is by visiting your My Account portal on the CRA’s website. You can also refer to your annual Notice of Assessment which is sent to you by the CRA after you file your tax return.

Keep in mind that the CRA does not track all your carryforwards. For example, excess donations and student loan interest amounts are not tracked by them. The good news, however, is that UFile will keep track of these carryforwards for you and apply them automatically when needed.

Can my banked deductions and credits travel “back” in time?

Yes, some of them can. For example, if your capital losses exceed your capital gains for the year, you can carry the excess loss forward to a future year. However, if you had capital gains in at least one of the three previous years, you could apply your current year excess capital losses against your past capital gains. This is called a carryback, and you can request it using a T1A form.

You can also request a carryback for business (non-capital) losses.

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Gery VittoratosPresented by UFile's tax expert
Gerry Vittoratos

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