Non-Capital Losses from Other Years (Quebec)

A non-capital loss occurs when allowable expenses from certain sources—such as business, fishing, farming, or property—exceed total income in a given year. Unlike capital losses, which can only offset capital gains, non- capital losses are more flexible and can be applied against any type of income.

Non-capital losses that cannot be fully deducted in the year they occur can be carried back up to three previous taxation years to offset income and recover taxes paid in those years. Alternatively, these losses can be carried forward up to 20 years to reduce taxable income in future years. The losses are applied against any source of income, providing flexibility to reduce overall tax liability.

Example:

Marie, a Quebec resident, runs a small business and incurs a non-capital loss of $50,000 in 2024 because her business expenses exceeded her income. She has other income in the year.

Answer: She can carry back part or all of this loss to offset income in the three previous years (2021–2023). For instance, if she had $20,000 of taxable income in 2022, she can apply $20,000 of the 2024 loss to reduce her 2022 income to zero, generating a tax refund for that year. The remaining $30,000 loss ($50,000 – $20,000) can be carried forward to offset future income for up to 20 years.