The end of 2025 is near; however, there is still time for some tax planning tips for year-end tax savings!
Trigger Capital Losses
The markets were high in 2025, and you may have triggered capital gains in your personal non-registered investment portfolio. Review your investments to see if you have any unrealized losses which could be triggered before the end of the year. The losses would offset the gains, thereby reducing (or even eliminating) your capital gains tax. You may also be able to carry back current-year losses to recover capital gains tax paid in any of the three previous years. This works best if you had a high marginal tax rate in the year the gain was incurred. The higher your tax rate, the bigger the savings from triggering losses. Losses must be used against current year capital gains first before any can be carried back to the previous three years, or carried forward.
If your investments are held within a corporation, there are additional tax planning considerations. Speak with your Purtzki Johansen advisor first to ensure triggering losses is still beneficial.
Should you decide to trigger losses, remember the “superficial loss” rules will require you to avoid repurchasing the same investment for at least 30 days.
First Home Savings Account (“FHSA”) Contributions
If you are planning a first home purchase, do not miss out on the FHSA benefit. Contributions are tax-deductible, but withdrawals are not taxable if used to purchase a first home. The deadline to contribute for 2025 is December 31, 2025. FHSA contribution room of $8,000 per year is only created once an account is opened (even if a contribution isn’t made). You carry forward unused contribution room each year. For example, if you contribute $3,000 in year one from the $8,000 of annual contribution room, you can contribute up to $13,000 in year two ($5,000 of unused room carried forward from year one plus $8,000 of participation room from year two). For this reason, if you qualify but you don’t already have an FHSA, make sure you open an account in 2025 even if you won’t make a contribution this year.
Registered Retirement Savings Plan (“RRSP”) Withdrawals
If your retirement planning projects your mandatory Registered Retirement Income Fund (“RRIF”) withdrawals at age 72 to be significant, one planning tip is to consider withdrawing from your RRSP early to help limit the RRIF income. This could help avoid higher tax brackets in the future or worse, clawback of your Old Age Security (“OAS”) pension. This strategy is sometimes called the “RRSP meltdown.”
For incorporated doctors, if your spouse has an RRSP account but a relatively low income, consider annual RRSP withdrawals prior to age 65 when corporate dividend income splitting is no longer restricted. The personal tax on the spouse’s RRSP withdrawal may be lower than the tax on a dividend from the corporation to the practice owner.
Lastly, if you are 65 and without any other forms of pension income, consider converting a portion of your RRSP into a RRIF now. RRIF income is considered pension income and is eligible for the $2,000 pension tax credit. RRSP income does not qualify.
Donations
If you are feeling charitable, consider making any donations before December 31, 2025, to access a tax credit for 2025. If you have any investments that have grown in value in your non-registered investment account, consider donating those securities instead of cash for twice the tax benefit. Not only do you get a donation tax credit, but you also do not pay any capital gains tax on the gain. Securities donated by your corporation can provide an even larger benefit.
Registered Education Savings Plan (“RESP”) Contributions or Withdrawals
Take advantage of the $500 Canada Education Savings Grant (“CESG”) by making a $2,500 contribution to your child’s RESP. If you have missed a previous year, you can double the contribution and receive a CESG payment of $1,000.
If your child is already attending post-secondary education and has an RESP, consider making an Education Assistance Payment (“EAP”) withdrawal in your child’s name. If your child has little or no income, this otherwise “taxable” withdrawal will end up being completely tax-free.
