When a small business investment doesn’t go as planned, there may still be a silver lining. The Allowable Business Investment Loss—commonly known as ABIL is a tax deduction for business losses. This special Canada Revenue Agency (CRA) tax deduction can offer significant relief for business owners and investors who’ve experienced a financial loss.
What Is an ABIL?
An ABIL lets you write off part of a business investment loss against any kind of income, not just capital gains, as long as you meet the right criteria. It kicks in when you’ve put money into a qualifying small business and that investment either goes under or you sell it at a loss.
Typically, this applies when:
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You loaned money to a small business that can’t repay you.
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You purchased shares in a small business that later went bankrupt or shut down.
In both cases, you must make the investment for business—not personal—reasons, and the company must qualify as a Canadian-controlled private corporation that mainly runs an active business in Canada.
Who Can Claim It?
ABILs are available to individual taxpayers, not corporations. You must be the one who personally incurred the loss on qualifying shares or debt, and the investment must not have been made for a tax shelter purpose.
How an Accountant Can Help
Determining whether a loss qualifies as an ABIL isn’t always straightforward. An experienced accountant can:
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Review your business investment to confirm if the corporation meets CRA’s criteria.
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Help gather the required documentation (e.g., bankruptcy notices, sale of shares, loan agreements).
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Ensure the loss is reported correctly on your return, including carrying any unused portion forward or back to other tax years.
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Help you explore how the deduction could lower your overall tax bill.
An ABIL won’t undo a business loss, but with the right guidance, it can help ease the financial impact. If you think you may qualify, a knowledgeable accountant can be your best ally in navigating the CRA’s rules and making the most of this tax-saving opportunity. Reach out to us. We’re here to help.
