Year-End Tax Planning Tips for Individuals in Canada

Introduction

Year-end tax planning is one of the most powerful ways Canadians can reduce their tax burden, increase deductions, optimize credits, and avoid surprises when filing their return. Strategic planning before December 31 allows individuals to take advantage of tax-saving opportunities that cannot be claimed afterward. Whether you are employed, self-employed, retired, investing, or running a side business, year-end planning can significantly improve your financial position. This guide provides the most effective year-end tax strategies for Canadians and explains how proper planning also reduces CRA audit risk.

Why Year-End Planning Matters

Once December 31 passes, most tax-planning opportunities disappear. Year-end planning helps individuals:
minimize income tax
optimize RRSP, TFSA, and FHSA decisions
trigger strategic capital gains or losses
maxim ize benefits such as CCB or GST credit
prepare for tax-sheltered investments
avoid missing deduction deadlines
ensure receipts and documentation are complete
properly plan self-employed income and instalments
CRA expects accurate reporting and complete documentation; last-minute planning reduces errors and audit triggers.

Tip 1: Maximize RRSP Contributions Strategically

RRSP contributions reduce taxable income. The deadline for contributions applied to the prior year is typically 60 days after year-end, but strategic planning should occur before December 31 to:
estimate taxable income
calculate contribution room
avoid overcontributions
optimize spousal RRSP timing
Individuals with fluctuating income should consider contributing in high-income years to maximize tax impact.

Tip 2: Use the TFSA for Tax-Free Investment Growth

TFSA contributions do not reduce income tax immediately but create tax-free growth. Year-end planning ensures:
unused contribution room is utilized
withdrawals are done strategically (withdrawals restore room the next year)
high-growth assets are placed in the TFSA
Canadians often forget that TFSA withdrawals made in December free up contribution room only on January 1 of the next year.

Tip 3: Leverage the New First Home Savings Account (FHSA)

The FHSA lets first-time homebuyers:
deduct contributions like an RRSP
withdraw tax-free like a TFSA when buying a home
Year-end planning ensures you maximize the annual limit and open an account early to start accumulating room.

Tip 4: Tax-Loss Harvesting for Investors

Capital losses can offset capital gains. Before year-end, individuals can:
sell investments at a loss to reduce taxable gains
avoid the superficial loss rule (rebuying identical securities within 30 days)
balance gains and losses for optimal tax results
Tax-loss harvesting is one of the most effective strategies for investors with volatile portfolios.

Tip 5: Charitable Donations Before December 31

Charitable gifts must be made by year-end to be claimed for that tax year. Donations generate valuable credits, especially for:
registered charities
federally approved organizations
gifts of securities (eliminate capital gains tax)
For donations over $200, higher tax credits apply. Documentation is essential as CRA audits donation receipts frequently.

Tip 6: Claim Medical Expenses Strategically

Medical expenses must be grouped into any 12-month period ending in the tax year. Year-end planning includes:
timing procedures
grouping family medical receipts
considering the lower-income spouse for claiming
Medical expenses are a common CRA audit area, so receipts must be clear and complete.

Tip 7: Review Income Splitting Opportunities

Options include:
pension income splitting for retirees
spousal RRSPs
prescribed rate loans
splitting CPP at age 60+
These strategies reduce family tax burden when used correctly.

Tip 8: Optimize RESP Contributions Before Year-End

RESPs provide:
20 percent CESG grants up to $500 per year
up to $1,000 if catching up for prior years
Year-end is the last chance to secure the annual grant.

Tip 9: Ensure All Deduction Receipts Are Documented

CRA denies deductions without receipts. Before year-end, individuals should gather:
medical receipts
childcare receipts
union dues
professional fees
employment expenses (with T2200/T2200S)
digital receipts and bank statements must be stored for six years.

Tip 10: Plan Self-Employed or Side-Business Income

Self-employed Canadians benefit from year-end strategies such as:
accelerating business purchases
deferring income
claiming CCA on equipment
maximizing home office and vehicle deductions
reviewing instalment requirements
cleaning up bookkeeping before CRA reviews
Proper business documentation prevents GST/HST or income tax audits.

Tip 11: Make RRSP Withdrawals Wisely

Withdrawing before or after year-end affects:
marginal tax rates
OAS clawback
GIS eligibility
income-tested credits
This is especially important for retirees or individuals with temporary low-income years.

Tip 12: Review Your Tax Instalments

Individuals required to pay instalments must ensure they are:
accurate
paid on time
based on current year’s income when advantageous
Proper instalment planning avoids interest charges and cash flow issues.

Tip 13: Review Capital Gains on Real Estate

Year-end is a good time to assess:
principal residence exemption
rental property adjustments
sale timing to manage gains
CRA audits real estate transactions aggressively; proper planning prevents assessment issues.

Mackisen Strategy

At Mackisen CPA Montreal, we help clients conduct personalized year-end tax planning to minimize tax, maximize credits, optimize investments, and maintain audit-proof documentation. Our tailored strategies ensure compliance with CRA rules while strengthening long-term financial health.

Real Client Experience

A Montreal professional saved thousands through RRSP optimization. A family reduced taxes through income splitting and RESP planning. An investor offset gains using strategic tax-loss harvesting. A retiree avoided OAS clawback by timing withdrawals properly.

Common Questions

Can I reduce taxes after year-end? Only through limited RRSP and filing strategies. When should I do tax planning? Before December 31. Do medical receipts need to be paper? Digital copies are accepted. Can investors use losses every year? Yes, capital losses carry forward indefinitely.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal provides strategic, compliant, and personalized year-end tax planning that helps individuals minimize tax exposure and stay fully aligned with CRA rules.