Essential Personal Tax Saving Tips for Year-End
With the holidays and the end of the calendar year quickly approaching, it is a great time to keep an eye on your personal finances and see how you can maximize your tax savings going into 2026. December 31 is a crucial deadline to squeeze in some personal tax credits that can significantly impact your personal tax situation. Outlined below are a few tax savings tips to consider for the 2025 year-end.
Tax Credits to Consider
Charitable Donations
Donating to registered charities not only supports a good cause but also provides a tax benefit. The first $200 of donations receive a credit of 20% in Ontario, but once you exceed this amount the credit grows to 40% of the donation. Further, if your income is over $250,000, you can receive a credit of up to 44% on your donations.
You don’t have to only donate money, but if you have investments, you could donate public stock to a charity as well and obtain a donation receipt for the fair market value of the investment. Allowing you to save tax on any accrued capital gains at the same time. If you do plan on making a stock donation, consult with your tax advisor to minimize any potential Alternative Minimum Tax (“AMT”) impact. AMT may apply if you are making a significant stock donation.
Contributions made before December 31 can be claimed on your tax return. Remember to keep all receipts from the charities to substantiate your claims.
Medical Expenses
Medical expenses that you, your spouse, or dependents incur can be claimed on your tax return, provided they exceed a certain threshold relative to your income. For common law or married couples, medical expenses can be pooled and claimed on the return of the lower income spouse to maximize the credit claim.
Eligible expenses can include insurance premiums, prescriptions, dental work, and even certain travel costs related to medical care. Make sure to gather all receipts and documentation before the end of the year.
To claim this credit, you need to have eligible expenses exceeding either 3% of your net income for the year, or $2,833 – whichever amount is lower.
Tuition and Education Credits
Tuition and education credits help students reduce their taxes by claiming eligible tuition fees paid to post-secondary institutions. If they don’t utilize all the credits in one year, they could save them for future years until there is tax payable. However, in Ontario, there is no provincial credit for 2025.
Students who cannot use the entire amount of their tuition and education credits may transfer up to $5,000 of unused credits to a parent, grandparent, spouse, or common-law partner. To do this, the student must complete the back of the T2202 form and indicate which relative the credits are being transferred to. The student must still report the tuition credit on their own tax return, indicating the amount transferred, while the receiving family member must also report the transfer on their own tax return to benefit from the credits.
Investment Considerations
Tax-Free Savings Account (TFSA) Contributions
While TFSA contributions are not tax-deductible, the investment growth and withdrawals are tax-free. Consider maximizing your TFSA contribution limit before the year-end to take full advantage of the tax-free growth.
A key recommendation is to review and track your own TFSA contributions, as the limit that can be found on your CRA MyAccount is only updated once per year, and is not always accurate. Overcontributions can lead to a penalty of 1% of the overcontribution for each month it exists.
For January 2026, there will be a further $7,000 of contribution room available.
Registered Retirement Savings Plan (RRSP) Contributions
Contributions to your RRSP can reduce your taxable income, providing immediate tax savings. Although the deadline for RRSP contributions for the current tax year is typically 60 days into the new year, contributing before December 31 allows you to maximize the growth of your investments on a tax-deferred basis.
You could find your RRSP contribution room for 2025 on your 2024 Personal Tax Notice of Assessment. Similar to the TFSA, if there is an overcontribution, CRA will assess a penalty of 1% of the overcontribution for every month it exists.
First Home Savings Account (FHSA) Contributions
FHSAs were new for 2023 and have a contribution limit of $8,000 per year from the year that you opened the account. For example, if you opened an account in 2024, and have not made any contributions to date, you can contribute up to $16,000 for 2025. Otherwise, your limit would be $8,000. Like a RRSP, contributions to a FHSA can reduce your taxable income and are a great way to save on taxes. FHSA rules require the contribution to be made by December 31 to claim on this year’s tax return.
Capital Gains and Losses
Review your investment portfolio to identify any capital gains or losses. Selling investments at a loss can offset capital gains realized during the year, reducing your overall taxable income. This strategy, known as tax-loss harvesting, requires the trades to be settled before December 31 to count for the current tax year, meaning the trades should be executed by December 30 at the latest.
A note of caution though, if you are looking to re-purchase the investments sold at a loss, make sure to wait at least 31 days to avoid running into the superficial loss rules in which the losses may be denied.
Family and Child Benefits
Child Care Expenses
Parents can claim certain child care expenses, such as daycare fees, after-school care programs, and summer day camps. Overnight camps are also eligible, however the deduction amount is limited to $25 per day. These expenses must be incurred to allow the parent to work or attend school. Keep diligent records and receipts to maximize your claim.
Other Personal Tax Credits
Home Buyers’ Amount
If you’ve purchased your first home in 2025, you may be eligible for the Home Buyers’ Amount, providing a non-refundable tax credit of up to $1,500.
Moving Expenses
If you’ve moved at least 40 kilometers closer to a new job, business location, or post-secondary institution, you may be able to deduct moving expenses. Eligible expenses include transportation, storage, and travel costs. Keep detailed records and receipts to support your claim as this is a commonly reviewed deduction by CRA.
Planning Ahead
Tax Instalments
If you owed more than $3,000 on your 2024 personal tax return, you would be required to make tax instalments for 2025. If you are required to do so, CRA would have mailed a letter in August of this year detailing the amounts for both September and December 15 instalments. The first payment for 2026 will be due on March 15th, and is based on the same level of instalments for 2025. A letter detailing this is generally mailed out in February.
Review your tax instalment payments to avoid interest and penalties. You could also check any required instalments on your CRA MyAccount. Currently, CRA is charging interest on late payments at a rate of 7%.
Review Tax Documents
Take the time to review all your tax documents, including pay stubs, investment statements, and receipts for deductible expenses. Organizing this information before the year-end can make tax filing smoother and help identify additional savings opportunities.
As the year draws to a close, it’s key to take proactive steps to optimize your tax situation. By considering the various credits and deductions available as December 31st quickly approaches, you could potentially reduce your tax liability and keep more money in your pocket. Naturally everyone has their own unique situation, consult with your tax professionals to ensure you’re taking full advantage of all available tax benefits and to receive personalized advice.
Start planning early to minimize stress and maximize your tax savings for the upcoming tax season. Here’s to a financially successful year-end and a prosperous new year!