Year-End Tax Planning Tips for Individuals – A Complete Guide by a Montreal CPA Firm Near You

Introduction

Effective year-end tax planning can save Canadians thousands of dollars and prevent stressful surprises at tax time. Whether you are an employee, a self-employed consultant, a real estate investor, or a retiree, the decisions you make before December 31 can directly impact your tax bill. Many taxpayers wait until filing season to think about taxes—by then it’s too late. This guide outlines the most important year-end tax strategies individuals should consider to reduce taxable income, maximize deductions and credits, and stay fully compliant with CRA.

Legal and Regulatory Framework

Year-end tax planning is governed by the Income Tax Act, CRA administrative policies, and provincial tax laws. Most tax reduction strategies must be completed by December 31 of the tax year. RRSP contributions are an exception, with a deadline 60 days into the following year. CRA requires taxpayers to maintain documentation for all deductions, credits, medical expenses, and investment transactions used in tax planning. Missing documentation can lead to denied claims, reassessments, and interest charges.

Key Court Decisions

In Canderel Ltd. v. Canada, the Supreme Court reinforced the principle that income must clearly reflect actual profit—guiding year-end planning for deferrals and deductions. In Tonn v. Canada, the court emphasized matching revenues with related expenses. In LeBlanc v. Canada, CRA denied medical credit claims due to improper documentation. These cases highlight the importance of proper timing and documentation in personal tax planning.

Top Year-End Tax Planning Strategies for Individuals

1. Maximize RRSP Contributions (Deadline: 60 Days After Year-End)

RRSP contributions reduce taxable income and create valuable tax deductions. High-income earners benefit most. Review your notice of assessment to confirm available room.

2. Contribute to Your TFSA Before Year-End

TFSAs do not reduce taxable income, but all growth is tax-free. Maximize contributions for long-term wealth building.

3. Tax-Loss Harvesting

Sell investments with accrued losses before year-end to offset capital gains. Beware of the superficial loss rule, which applies if you repurchase the same investment within 30 days.

4. Charitable Donations

Donations made by December 31 unlock federal and provincial donation tax credits. Donating appreciated securities eliminates capital gains tax entirely.

5. Medical Expenses

Medical credits are based on a 12-month period ending in the year. Consider grouping expenses to exceed the threshold for increased credits.

6. Income Splitting With Family

Use spousal RRSPs, prescribed-rate loans, pension splitting, and TFSA contributions to optimize family tax planning. Attribution rules must be considered.

7. Review Withholding and Installments

If you owed tax last year, adjust your 2024 payroll deductions or installment schedule to avoid interest charges.

8. Optimize Child Care and Education Credits

Claim eligible child care fees, tutoring, post-secondary credits, and disability supports. Ensure receipts are CRA-compliant.

9. Manage Support Payments Properly

Spousal support is taxable/deductible only when paid under a written agreement or court order. Child support is not deductible or taxable.

10. Review Real Estate Transactions

If you sold a property, ensure the sale is reported correctly—principal residence sales must be reported even if tax-free.

Special Considerations for Self-Employed Individuals

Self-employed Canadians should consider: purchasing assets before year-end for CCA, paying expenses early, invoicing strategically, contributing to CPP through income planning, tracking home office and vehicle expenses, and optimizing GST/HST reporting. Year-end bookkeeping cleanup is essential to avoid CRA issues.

Year-End Tips for Investors

Investors should verify: interest deductibility on investment loans, adjusted cost base records, T1135 foreign asset reporting status, dividend tax credit positioning, and timing of withdrawals from non-registered accounts.

Why Documentation Matters

CRA frequently denies deductions and credits due to missing receipts, vague descriptions, or undocumented transactions. Keep receipts for medical expenses, donations, tutoring, renovation credits, investment activities, and child care. Digital copies are accepted if legible.

Mackisen Strategy

At Mackisen CPA Montreal, we create personalized year-end tax plans tailored to your income, investments, family structure, and retirement goals. We optimize RRSP and TFSA strategies, perform tax-loss harvesting, prepare donation strategies, review foreign asset exposure, calculate installment adjustments, and prepare comprehensive year-end action lists to minimize your tax bill.

Real Client Experience

A high-income Montreal professional saved over $12,000 by contributing strategically to RRSP and donating appreciated securities. A retiree reduced OAS clawback by splitting pension income with their spouse. An investor avoided CRA reassessment after we corrected superficial loss issues. A self-employed consultant improved cash flow by accelerating deductions and planning GST/HST payments.

Common Questions

Do all strategies need to be completed by December 31? Most, yes—except RRSPs which have a later deadline. Do I need a CPA for year-end planning? Strongly recommended for complex income or investments. Can year-end planning reduce CRA audit risk? Yes—clean, well-documented filings reduce red flags.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal provides expert year-end tax planning that minimizes tax, strengthens compliance, and gives clients financial clarity heading into the new year.