Effective wealth planning takes place throughout the year. However, you can take some key steps before the end of the year and early in the new year from a tax-planning perspective that can make a positive impact on your overall finances.
While the following list is not exhaustive, here are some time-sensitive items to look at now for 2025 as well as proactive items for the new year.
On or before December 15, 2025
Pay quarterly tax instalments for 2025, if required.
If your 2024 tax return showed net tax owing (total tax liability less tax withheld at source) of over $3,000 ($1,800 for Quebec residents), you may have received a notification from the Canada Revenue Agency (CRA), or Revenu Québec (RQ) for Quebec residents, requiring you to pay quarterly tax instalments for 2025.
If you have not paid these instalments and expect your net tax owing in 2025 to exceed $3,000 ($1,800 for Quebec residents), you should make a payment as soon as possible. This will reduce or avoid instalment interest and penalties from being charged.
Note: Interest on instalments and amounts owing to the CRA compounds daily at the “prescribed rate” plus an additional 4%. Amounts owing to RQ are also subject to interest charges.
On or before December 30, 2025
Optimize the taxation of your capital gains and losses.
Consult with your tax and investment advisors to review your situation. For investments, trades must be entered on or before December 30, 2025 in order to be settled by year-end (under the T+1 settlement cycle).
Be aware of any other factors that may limit your ability to trade certain positions on short notice, such as liquidity constraints with alternative investments.
Be sure to factor in the impact of foreign exchange if investments are not denominated in Canadian dollars.
Note: In March 2025, the government cancelled the proposed increase to the capital gains inclusion rate. Therefore, the inclusion rate remains at 50%.
Consider the following strategies:
- Put tax-loss strategies to work. If you have realized capital gains throughout the year, it may make sense to realize capital losses that can offset these gains in the same year.
Be aware that any tax-loss selling strategies you use should account for the “superficial loss” rules, which will deny capital losses if identical investments are repurchased (or have been previously purchased) within a specified time period. - Trigger capital gains to absorb capital losses. If you have realized capital losses throughout the year, it may make sense to realize capital gains that can offset these losses in the same year.
While unused capital losses can be carried forward, they may trigger future “alternative minimum tax” (AMT) consequences. This is because in computing an individual’s minimum tax each year, the AMT limits the amount of capital loss carryovers that can be claimed to 50% of what can be claimed under regular income tax rules. As a result, using capital loss carryovers may, in certain situations, result in additional taxes payable due to the AMT. Consult with your tax advisors to assess whether accumulating capital loss carryovers could result in AMT implications. - Review whether claiming a capital gains reserve makes sense. If you sold an asset this year and will receive portions of the payment over a number of years, you may be able to claim a capital gains reserve to defer a portion of the total capital gain from being recognized as income this year. Claiming a reserve and spreading the capital gain over multiple years may reduce taxes by taking advantage of marginal tax brackets.
On or before December 31, 2025
Tax-Free Savings Account (TFSA):
- Consider contributing to your TFSA. The TFSA dollar limit for 2025 is $7,000. Keep in mind that TFSA contribution room accumulates if not used, so you may be able to top up your TFSA if prior contributions were missed. Check with the CRA to verify your unused contribution room.
- If you plan to withdraw from your TFSA soon, consider making the withdrawal by year-end rather than waiting until early next year. This is because a withdrawal this year will be added back to your TFSA contribution room at the beginning of next year.
Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF):
- Consider withdrawing funds from your RRSP or RRIF by year-end if you are in a lower tax bracket this year, or to take advantage of the $2,000 pension tax credit for RRIF income received by individuals who are at least age 65.
Note: If you are the owner of a spousal RRSP, you should be mindful of “income attribution” rules that may apply to withdrawals you make from the account, if your spouse had made contributions during the year or the two prior calendar years.
- If you plan to withdraw from your RRSP under the Lifelong Learning Plan (LLP) soon, consider making the withdrawal early next year rather than by year-end to maximize the repayment period.
- If you plan to make a first withdrawal from your RRSP under the Home Buyers’ Plan (HBP) soon, consider making the withdrawal by year-end to maximize the repayment period.
Temporary relief rules apply to participants making their first withdrawal between January 1, 2022 and December 31, 2025. Under these rules, the start of the 15-year repayment period is deferred to the fifth year following the year of the first withdrawal (instead of the usual second year). - If you plan to withdraw from your RRSP under the Home Buyers’ Plan (HBP) or Lifelong Learning Plan (LLP) soon, consider making the withdrawal early next year rather than by year-end to maximize the repayment period.
- If you are age 71 this year, you must convert your RRSP to a RRIF by December 31 and begin taking minimum withdrawals next year. Consider the following:
- Using your younger spouse’s age for minimum payment calculations.
- Making a final RRSP contribution by year-end, if you have “earned income” this year and do not have a younger spouse that you can make RRSP contributions for in the future. A final contribution can be made to account for new RRSP room that will accrue on January 1, 2026 but will not be available to you as you can no longer own RRSPs. However, be aware that if the final contribution exceeds your 2025 RRSP contribution limit, there will be a monthly 1% penalty tax payable on the overcontribution, before new room accrues on January 1, 2026.
First Home Savings Account (FHSA):
- If you have an FHSA open, consider making a contribution by year-end so that it may be claimed as a deduction on your 2025 tax return. The FHSA annual participation room is $8,000, with a lifetime limit of $40,000.
- If you are eligible to open an FHSA, consider opening an account by year-end. Even if you cannot make a full contribution by year-end, opening an account would allow you to carry forward up to $8,000 of unused FHSA participation room to next year. However, be aware that your maximum participation period for the FHSA is 15 years, so opening an account by year-end means that you would have to close it by December 31, 2040.
Example: 2025.Opening an FHSA by year-end would allow you to contribute up to $16,000 in 2026 (assuming no contributions are made this year), while opening an FHSA in 2026 would only allow you to contribute $8,000 in 2026.
- If you made a qualifying withdrawal from an FHSA during 2024 to purchase your first home, you must close all of your FHSAs on or before December 31, 2025. Any remaining balances in your FHSAs could be transferred to your RRSP or RRIF on a tax-deferred basis, provided the transfer is a direct transfer and the transfer is made before this date. Such transfer would not require you to use your existing RRSP contribution room.
Registered Education Savings Plan (RESP) and Registered Disability Savings Plan (RDSP).
- Consider making contributions to an RESP and/or RDSP for the benefit of your family members. The federal government can provide grants and bonds to RESPs and RDSPs which are tied to contributions made.
Consider making charitable donations.
- Donating certain property directly to charities, such as publicly listed securities, can increase your tax savings.
Note: Some charities may require additional time to accept and process donations during this time. You should plan accordingly.
The AMT could reduce the tax efficiency of making donations. In computing an individual’s minimum tax each year, the AMT limits the amount of donation tax credits that can be claimed to 80% of what can be claimed under regular income tax rules. It also requires 30% of capital gains from the donation of publicly listed securities to be included when computing taxable income (compared to 0% under regular income tax rules). Consult with your tax advisors to assess whether any of your donations could result in AMT implications.
Pay expenses eligible for tax deductions or credits.
These include but are not limited to:
- Investment management fees
- Interest on third-party borrowings used for investing
- Childcare expenses
- Medical expenses
- Home office expenses
Consider whether to intentionally recognize or delay taxable income this year.
If you anticipate your overall tax rate will be materially different between this year and next year, you may wish to intentionally recognize or delay items of income, deductions, and credits to take advantage of the anticipated tax rate differences. One example outlined earlier is the claiming of a capital gains reserve.
On or before January 30, 2026
Pay the accrued interest on outstanding income-splitting loans.
Interest on such loans must be paid on or before this date to avoid the application of income attribution rules.
Note: If your income-splitting loan was entered into during 2025, accrued interest must be paid on or before this date, even if the loan has not been outstanding for a full 12 months.
On or before March 2, 2026
Make RRSP and/or spousal RRSP contributions.
A RRSP or a spousal RRSP contribution made on or before this date will be deductible on your 2025 tax return, subject to your RRSP contribution limit. The RRSP dollar limit for 2025 is $32,490. Check with the CRA to verify your RRSP contribution limit.
Note: If you turned age 71 in 2025, you would only have until December 31, 2025 to make a final contribution to your RRSP.
Pay the minimum repayment amount on the outstanding balance of your HBP or LLP.
If the minimum repayment amount is not made on or before this date, it will be taxable on your 2025 tax return.
Additional considerations for incorporated business owners
Items to consider include but are not limited to:
- Salary and dividend mix for the year to yourself and family members. Salaries paid must be reasonable in the circumstances. Be aware that dividends paid to related persons from a private corporation may be caught under the “tax on split income” rules.
- Planning for investments held within your corporation, particularly if it or any associated corporations benefit from the “small business deduction” on active business income. Tax rules phase out the small business deduction limit of an associated corporate group once its passive investment income from the prior year exceeds $50,000.
- Repaying shareholder loans owed to your corporation to avoid potential inclusion of a taxable benefit.
Note: A taxable imputed interest benefit may be applicable when you repay all or a portion of an outstanding shareholder loan. Consult with your tax advisors on this matter.
- Declaring capital dividends from your corporation’s “capital dividend account” (CDA). Capital dividends are favourable because they are tax-free distributions to Canadian-resident shareholders.
Note: If it makes sense to implement tax-loss selling in your corporate investment portfolio, you may want to review whether there is a positive balance in the CDA and whether to declare a capital dividend prior to selling investments. This is because the non-deductible portion of capital losses realized will immediately decrease the balance in the CDA.
Additional considerations for trustees of trusts
- If you are a trustee of a trust that has taxable income during the year, we recommend that you work with your tax and legal advisors to determine whether this income will be retained in the trust or will be distributed to beneficiaries and the associated tax implications. Trustee decisions to distribute income to beneficiaries generally have to be made by year-end for this income to be taxed in the beneficiaries’ 2025 tax returns.
- Consult your tax advisors on whether “enhanced trust reporting rules” are applicable to the trust you manage. These rules may require you to file a trust income tax and information return for the year with an additional schedule disclosing information on the various parties to the trust. These rules apply not only to traditional trusts but also to certain “bare trust arrangements,” where the trustee only has legal ownership of the trust’s property and has no significant powers or responsibilities other than to deal with the property under the instruction of the beneficiaries, who retain beneficial ownership over the trust’s property.
Should a trust be subject to the enhanced trust reporting rules for 2025, the filing due date of the tax return is March 31, 2026.
Conclusion
We recommend you discuss these strategies with your professional investment, tax, and legal advisors before implementation to make sure they fit within your overall wealth plan.
Contact your Richardson Wealth Advisor for more information on these topics, including materials on:
- AMT
- Tax-loss selling
- TFSA
- RRSP
- HBP and LLP
- FHSA
- RESP
- Shareholder remuneration
- Tax on split income
- Shareholder loans
Contact us