One of the main factors to consider when reviewing your investments near year-end is whether any losing positions could help reduce your capital gains tax bill. If you own Canadian stocks in a non-registered investment account, selling certain holdings for less than their adjusted cost base may allow you to realize a capital loss.
That loss could then be useful for offsetting taxable capital gains, subject to the applicable rules. However, I’d avoid assuming that every stock showing a loss in your portfolio automatically qualifies for a tax deduction.
I’d also consider the company’s business outlook and other fundamentals before deciding to sell. A sharp share-price decline might reflect serious financial problems, but it could also create a potential recovery opportunity for patient investors.
In this article, I’ll talk about three important Canadian tax-loss selling rules and highlight two beaten-down TSX stocks that investors may want to reassess before 2026 ends.
3 tax-loss selling rules to remember
Tax-loss selling might sound complicated, but there are three basic rules Canadian investors should keep in mind before making any decisions.
First, a drop in your stock’s price alone won’t qualify you for a tax deduction. You generally need to sell it at a loss, meaning you receive less than what you originally paid for it, after accounting for any buying and selling costs.
Second, you can generally use these losses to offset taxable capital gains, but not your regular employment income. And if your losses exceed your gains this year, the unused net capital losses can be carried back three years or forward indefinitely.
Finally, you may want to be careful about buying back the same stock too quickly. Under the superficial-loss rule, buying identical shares within a 61-day window (30 days before the sale, the day of the sale, or 30 days after) can prevent you from claiming the loss immediately if you or an affiliated person still owns or has a right to acquire those shares 30 days after the sale.
Now, let’s look at two TSX stocks whose steep declines could put them on investors’ tax-loss selling lists.
goeasy stock
If you’ve been holding goeasy (TSX: GSY) stock this year, the sharp decline in its share price has probably been difficult to ignore. This Mississauga-based consumer lender, which operates through easyfinancial, easyhome, and LendCare, has seen GSY stock plunge 66% year to date.
Currently, GSY stock trades at $44.33 per share with a market cap of just $710 million. The company has also suspended its regular quarterly dividend.
And the reasons behind this selloff become clearer when you look at its recent financials. In the second quarter, goeasy’s net profit plunged about 83% YoY to $15.9 million as credit losses and borrowing costs continued to hurt its profitability.
But the company has tightened lending standards lately, reduced new loan originations, and repaid $314 million under its revolving credit facility to improve its financial flexibility.
If these efforts succeed, goeasy could eventually regain investors’ confidence, making it an interesting turnaround stock. That’s why shareholders might want to think beyond the immediate tax benefits before selling shares of goeasy.
Element Fleet Management stock
While goeasy’s sharp decline reflects its weakening financial results, Element Fleet Management (TSX: EFN) shows why tax-loss selling shouldn’t become an automatic reaction to a red number in your portfolio.
This Toronto-based vehicle fleet management firm has seen its shares tumble 39% in 2026 to $21.86 apiece. With a market cap of $8.5 billion, EFN stock currently offers a 2.7% annualized dividend yield.
What’s interesting is that Element’s underlying business has continued to grow despite this disappointing stock performance. In the second quarter, its adjusted earnings rose 12% YoY to US$0.34 per share. In October, it announced an expanded partnership with Alphabet-backed Waymo to back its planned autonomous vehicle operations in Toronto in 2028.
With its growing earnings and expansion into autonomous mobility, Element could still reward patient long-term investors. So, while tax-loss selling might seem tempting after its recent decline, investors shouldn’t overlook the company’s growth potential when deciding whether to sell.