Most Canadians leave tax-saving decisions until after filing season — by then, the options are gone. Tohme Accounting has been helping individuals and incorporated business owners in Ottawa and Toronto reduce their annual tax bill through proactive, CRA-compliant tax planning. This guide covers the key year-end strategies for 2026 before December 31 closes your window.
CRA calculates your tax obligation based on decisions made during the calendar year, not at filing time. Most deductions, elections, and registered account contributions must be completed before December 31 — not in April. RRSP is the only major exception with a March deadline. Capital loss harvesting, income timing, compensation decisions, and account contributions all require action before the calendar closes. Waiting until filing season means working with a fixed number rather than optimizing it. Year-end planning is where tax savings are actually created.
RRSP contributions reduce taxable income dollar-for-dollar. Unused room from prior years carries forward, so check your Notice of Assessment for your exact limit. The 2025 RRSP maximum is $32,490, with the March 2026 deadline applying. Spousal RRSP contributions allow the contributing spouse to deduct the amount while the withdrawing spouse pays tax later, creating a genuine income-splitting opportunity. Attribution rules apply if the receiving spouse withdraws within three years of the contribution year, so timing matters.
The 2025 TFSA annual limit is $7,000, with cumulative room of up to $102,000 for Canadians who have been eligible since 2009. One misunderstood rule: withdrawals restore contribution room on January 1 of the following calendar year, not immediately. If you withdraw in December rather than January, you regain that room one full year sooner. Moving appreciated investments from a taxable account into a TFSA permanently shelters all future growth. Triggering a capital gain on transfer requires advance planning, so confirm the mechanics with your accountant before acting.
If you hold investments in a non-registered account worth less than you paid, selling before December 30 crystallizes a capital loss that offsets capital gains realized this year. That loss can also be carried back three years or forward indefinitely. Trades must settle before December 31, which means initiating the sale by December 30. The superficial loss rule denies the loss if you or an affiliated person, including a spouse, repurchases the same investment within 30 days before or after the sale. Plan the replacement position carefully before transacting.
Shifting income to a lower-bracket family member reduces the household’s combined tax bill. Established mechanisms include spousal RRSP contributions, prescribed rate loans, and paying reasonable wages to a spouse or adult children for genuine work performed. For incorporated owners, dividend declarations to qualifying family shareholders are also an option. TOSI rules, however, apply to dividends paid to adult family members and require specific qualifying tests to be met. Attribution rules govern most transfer arrangements. Confirm what is permitted in your specific situation with a CPA before implementing any strategy.
Whether to realize a capital gain before or after December 31 depends on your expected marginal tax rate in each year and the applicable inclusion rate set by the CRA, which can change from year to year. Deferring a sale to January delays the tax owing until the following April. Accelerating a sale makes sense when your income, and therefore your rate, is expected to be higher next year. A capital gains reserve can spread taxable gains on installment sales over up to five years. The Lifetime Capital Gains Exemption of $1.25M applies to qualifying small business corporation shares. Confirm the decision with a CPA before transacting.
For incorporated business owners, the salary-versus-dividend decision is not a filing-time choice. It must be resolved before year-end. Salary declared before December 31 creates RRSP contribution room and CPP contributions. Dividends declared in December may be more tax-efficient when the corporate rate is lower than the personal rate. Bonuses declared before corporate year-end are deductible when paid within 180 days. The optimal compensation mix depends on the owner’s total income, provincial tax rates, and the corporation’s retained earnings. This calculation requires tax integration modeling and should not be estimated.
RESP contributions of at least $2,500 before December 31 trigger the Canada Education Savings Grant of up to $500 for the current year, or $1,000 if unused grant room from prior years exists. Missing the deadline forfeits the annual grant permanently. The FHSA allows first-time homebuyers to deduct contributions and grow their savings tax-free, with an annual limit of $ 8,000 and a lifetime maximum of $40,000. A critical planning note: unused FHSA contribution room only carries forward if the account is already open. Opening an FHSA before December 31 preserves $8,000 of 2026 room even without an immediate contribution.
Incorporated businesses with fiscal year-ends other than December 31 operate on a different planning window than individual taxpayers. Purchasing depreciable equipment before fiscal year-end may trigger a Capital Cost Allowance deduction, though the half-year rule limits the first-year claim to 50% of the eligible amount. Accruing staff bonuses before the fiscal close creates a corporate deduction, provided the bonuses are paid within 180 days. Prepaying insurance, professional fees, or service subscriptions for the following year can also accelerate deductions into the current period. Review these decisions with your accountant before your fiscal year closes.
Charitable donations to registered Canadian charities must be made before December 31 to qualify for the current tax year. The federal donation credit is 15% on the first $200 and 29% on amounts above that, rising to 33% for high earners. Donating publicly traded securities with an unrealized gain is more tax-efficient than donating cash: the capital gain on disposition is exempt, and the donor receives a full fair-market-value receipt. For incorporated owners, in-kind securities donations also increase the corporation’s capital dividend account, creating additional planning value beyond the immediate credit.
Effective tax planning in Canada is not a filing-season activity. It is a year-round discipline with a hard deadline of December 31. The strategies in this guide, from registered accounts and income splitting to tax-loss harvesting, compensation structure, and charitable giving, all require decisions and action before the calendar closes. If you are unsure which strategies apply to your situation, a free consultation with Samer Tohme, CPA, at Tohme Accounting will clarify what is available to you before the window closes.
December 31 is the hard deadline for most year-end tax planning decisions in Canada. Registered account contributions (outside of RRSP), capital loss harvesting, income elections, and charitable donations must all be completed before the calendar year closes. For investment sales, trades must settle before December 31, which means initiating the transaction by December 30. The RRSP is the only major planning vehicle with a post-year deadline, set in March of the following year. Decisions made in January apply to the new tax year, not the prior one.
Incorporated business owners have several year-end levers at their disposal. The salary-versus-dividend compensation mix, bonus accruals before fiscal close, Capital Cost Allowance claims on newly purchased equipment, and passive income management to protect access to the small business deduction are all worth reviewing. The right combination depends on the corporation’s retained earnings, the owner’s personal income, and the projected income for the following year. A CPA should review and model the compensation structure before the corporate fiscal year closes, not at T2 filing time when those decisions can no longer be changed.
Income splitting, which involves shifting income to a lower-bracket family member to reduce the household’s combined tax, is permitted in Canada under specific rules. Spousal RRSP contributions, prescribed rate loans, and pension income splitting are well-established mechanisms. Paying dividends to adult family shareholders is also possible, but it is subject to the Tax on Split Income rules, which require that qualifying tests be met. Attribution rules apply when transfers are made without proper structuring. The rules are nuanced and situation-specific, so confirm with a CPA which mechanisms apply before taking action.
Capital loss harvesting must be initiated by December 30, the last trading day that allows settlement before December 31. Selling an investment at a loss crystallizes a capital loss that offsets capital gains realized this year and can be carried back for up to 3 years or forward indefinitely. The superficial loss rule denies the loss if you or an affiliated person, including a spouse, purchases the same investment within 30 days before or after the sale. Do not repurchase the same position until the 30-day window has fully passed, or the loss will be disallowed.
TFSA withdrawals restore contribution room on January 1 of the following calendar year, not immediately after the withdrawal. If you withdraw in December rather than January, you recover that room one full year earlier. The 2025 annual TFSA contribution limit is $7,000. For Canadians who have been eligible since 2009, cumulative room may be as high as $102,000 depending on past contribution and withdrawal history. Year-end planning around TFSA withdrawals can meaningfully accelerate your re-contribution timing. Confirm your exact available room through CRA My Account before contributing.
Yes, if your child is eligible. Contributing at least $2,500 to an RESP before December 31 triggers the Canada Education Savings Grant of up to $500 for the current year, or up to $1,000 if unused grant room exists from prior years. Missing the year-end deadline permanently forfeits that year’s grant. If your child is 15 or older, specific contribution requirements apply to maintain grant eligibility. Confirm your child’s eligibility, existing grant room, and any age-related conditions with your accountant before the calendar year closes.
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