Tax Tip Thursday

We have spoken a couple of times in the last month about the opportunities that can be taken advantage of in the last quarter of the year… This is a great time either start taking action or at planning.

Here are five tax-saving tips for Canadian taxpayers filing a T1 personal income tax return in 2025.

1. Maximize RRSP Contributions

Contributing to your RRSP can lower your taxable income for the 2025 tax year, which may result in a reduced tax bill — or even a refund.

While Canadians technically have 60 extra days in the new year to make RRSP contributions for 2025 (the deadline is March 2, 2026), it’s a good idea to top up your RRSP before the end of the year.

Earnings within an RRSP accumulate on a tax-deferred basis.

If you can put the money away before the end of year, the money is going to start working for you right away.  Also – in general, stock prices tend to be down in the last quarter of the calendar year.

Your contribution room is based on how much income you earned the previous year. To find out how much contribution room you have, check your CRA account online.

Do not over contribute!  There is a 1% penalty per month on the over contributions!  AND it is very complicated to get the paperwork sorted out with the CRA.

2. Use Tax-Free Savings Accounts (TFSA)

While TFSA contributions do not reduce taxable income, investment gains within a TFSA are completely tax-free. Unused contribution room carries forward, so maximizing this account can lead to significant long-term tax savings.

Generally speaking, it is best to keep your money in your TFSA.

Contributions to TFSAs are made with after-tax dollars, but when you take the money out later on, the earnings and the principal are tax-free. Leaving the money in there can generate a tax-free retirement.

If you do have to take money out of a TFSA, do it before the end of this year instead of waiting until next year — you can not re-contribute the money in the same year you withdraw it without potentially over-contributing.

If you contribute more than your available TFSA contribution room, you’ll have to pay a penalty of one per cent per month on the highest excess amount in the account,

It is wise to take a look at your TFSA contributions and withdrawals for 2025 to ensure you have not over-contributed.  If you are in that situation, pull the money out immediately, because there are penalties of 1% per month on over contributions. 

3. Claim All Eligible Deductions and Credits

Do not miss out on common deductions and credits, such as:

• Medical expenses (above 3% of net income)
• Charitable donations (especially appreciated securities)
• Childcare expenses
• Home office expenses (especially relevant for remote workers)
• Tuition and student loan interest
• Canada Workers Benefit (CWB)
• First-Time Home Buyers’ Credit

4. Harvest Investment Losses

Use tax-loss selling to offset capital gains. Selling investments at a loss before year-end can reduce your taxable capital gains. Be cautious of the superficial loss rule, which disallows a loss if you repurchase the same investment within 30 days.

5. Prepay Deductible Expenses

If you have deductible expenses like professional fees, tuition, or union dues, consider prepaying them before year-end to claim them in the current tax year. This can help reduce your taxable income sooner.

Now is a great time to speak with your accountant about planning your tax saving opportunities!  Make An Appointment today!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.