Year-End Tax Tips

As the year comes to a close, Canadians have valuable opportunities to reduce taxable income, take advantage of key tax credits, and set themselves up for a successful new year. Effective year-end planning can make a major difference in how much you owe and how much you keep. With tax rules continuing to evolve, being proactive is more important than ever.

NBFM INC. can help individuals, families, business owners, and self-employed professionals navigate the complexities of tax law. Below are the most important year-end tax tips you should implement before December 31.

1. Maximize Tax-Advantaged Contributions

RRSP Contributions: while RRSP contributions made up to March 1, (First 60 Day) count toward your tax return. The earlier you contribute the more time your investments have to grow tax-deferred.

RRSP are effective for:

• Reducing taxable income
• Income splitting with a spouse (via spousal RRSPs)
• Saving for retirement effectively

TFSA Contributions: Unlike RRSPs, TFSA contributions do not reduce taxable income but they allow investments to grow and be withdrawn tax-free.

RESP Contributions: The government contributes up to $500 per year per child via the CESG. Contributing before December 31 ensures you receive the maximum matching amount .

3. Consider Capital Gains and Losses Before December 31

One of the most popular year-end tax tips is tax-loss harvesting. If you have investments that have declined in value, selling them before year-end may allow you to claim capital loss , which can offset capital gains or can be carried forward indefinitely.

Key Rules

• Trades must settle so don’t wait until the last week of December
• Superficial loss rules apply if you repurchase the same or identical investment within 30 days

4. Review Charitable Donations and Donate Before December 31

Charitable donations made before year-end qualify for the donation credit.

• Federal credit of 15% on the first $200 and 29% (or 33% for high-income earners)
• Additional provincial credits

5. Prepay Expenses to Reduce Taxable Income

For self employed individuals, prepaying certain expenses before the year-end can lower taxable income.

Common deductible expenses include

• Office supplies
• Software subscriptions
• Utilities and internet
• Professional fees and training

Making these payments before December 31 is one of the most valuable tax tips for entrepreneurs.

If you are incorporated, one of the most important year end tax planning questions is “should I take dividends or salary?”

Salary is beneficial because:

• It creates RRSP room
• It increases CPP contributions (helping future retirement income)
• It counts as earned income

While dividends are simpler to administrate, they do not create RRSP room, result in CPP contributions, or create earned income.

Most business owners benefit from a mix, which is why it’s essential to consult with CPA before year-end to determine the optimal split based on your corporation’s income, personal goals, and tax bracket.

7. Optimize Tax Credits by Year-End

Don’t miss valuable credits such as:

• Medical expense tax credit
• Disability tax credit
• Home accessibility credit
• Canada training credit
• Digital news subscription credit

Reviewing these in December ensures you don’t leave money on the table.

8. Year-End Tax Planning for Self-Employed Canadian

If you are self employed, year-end tax planning is critical.

Consider the following year end tax tips:

• Track all business-related expenses and retain receipts
• Claim home office expenses (based on square footage or simplified method)
• Maximize vehicle expense deductions
• Consider buying equipment before year-end for CCA claims
• Review GST/HST obligations
• Set aside funds for income tax instalments

• Spousal RRSPs
• Prescribed rate spousal loans
• Dividend income splitting in family corporations
• Paying reasonable salaries to family members employed by your business

These strategies can significantly reduced your family’s tax burden.

If your’e wondering “What should I do now to prepare for tax planning?”

Here are the essentials:

• Review your estimated taxable income,
• Evaluate whether you should defer or accelerate income
• Update financial plan and budget
• Consider incorporating if income is rising
• Review estate planning documents
• Organize and digitize receipts for a smoother tax season

The most effective tax planning happens before the year begins.