Tax Carry Forwards - A Forgotten Fax Benefit

Tax carryforward

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

What are carry-forwards?

Carry-forwards 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:

  • RRSP contributions (deduction)
  • capital losses (deduction)
  • business (non-capital) losses (deduction)
  • tuition fees (credit)
  • student loan interest
  • donations (credit)

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 carry forwards available?

The best way to find out what carry-forward 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 carry-forwards. For example, excess donations and student loan interest amounts are not tracked by them. The good news, however, is that Filing Taxes will keep track of these carry-forwards for you and apply them automatically when needed.

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's 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.

If you are looking for a professional Tax Accountant who can lead you through the process of claiming business expenses on your tax return, then feel free to reach out to Filing Taxes at 416-479-8532. Schedule your tax preparation appointment with us and take the first step towards proper management of your finances. Our professional personal tax accountants will make sure to get you the maximum tax refund on your personal tax return.

Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.

Written By:
Salman Rundhawa
Salman Rundhawa is the founder of Filing Taxes. Salman provides valuable tax planning, accounting, and income tax preparation services in Toronto, Mississauga, Oakville, and Hamilton.

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