Ask a Planner

By Jason Heath, CFP on March 24, 2025
Estimated reading time: 4 minutes

By Jason Heath, CFP on March 24, 2025
Estimated reading time: 4 minutes

RRSP contributions can reduce capital gains tax. How does that work, and when might a different tax strategy be a better option?

If I have the RRSP room and put any capital gains earned into an RRSP, would I pay tax on that before I put it into an RRSP or would the RRSP delay the tax until I withdraw it?

—Leslie

When you sell an investment that isn’t tax-sheltered for a profit, you must report a capital gain on your tax return. But there are a few options to reduce the tax owed, which we will look at below.

If you have capital losses from the current year, or capital losses from previous years that you have not yet deducted, you can claim those unused losses to reduce a capital gain from the current tax year. Capital losses carry forward indefinitely, with no expiration.

You can also strategically trigger capital losses by selling investments at a loss before year-end—a strategy known as tax-loss selling.

A contribution to your registered retirement savings plan (RRSP) may help to reduce the potential tax payable as well, Leslie.

When you contribute to an RRSP, you can claim a deduction against your income to the extent that you have

© MoneySense