It is hard to believe there are only weeks left in 2025. As the end of the year fast approaches, like me you are probably looking forward to enjoying the upcoming festive season. However, along with your holiday shopping, here are some time-sensitive tax tips that will need action before the end of December.
Tax-loss Selling
You may be hard-pressed to find an investment that lost money this year, but if you have one in a non-registered portfolio, selling it before the end of the year can offset other capital gains you have realized in the portfolio. The losses incurred don’t have to be used in the current year, they can be carried back up to three years or carried forward indefinitely to offset gains in those years. To crystalize the loss in 2025, you must complete the trade no later than December 29th this is because it takes 2 days for a trade to settle.
Contribute before Converting your RRSP
If you’re turning 71 this year, you must roll your RRSP to a RRIF before the end of the year. One interesting idea if you have earned income for 2025 is to over-contribute to your RRSP in December, as the earned income will have generated contribution room for 2026. You will be penalized 1% for the over-contribution, but that goes away as of January.
Contribute to a RESP
A Registered Education Savings Plan (RESP) is a great savings plan for a child’s education. Unlike an RRSP, the RESP deadline for contributions is December 31st. Consider contributing at least $2500 by year-end to receive the maximum CESG for this year, or possibly more if you have unused grant room from previous years. The maximum grant that will be received per beneficiary is $1000 per year, equating to $5000 contribution: or two years’ worth of contribution room. This is especially important if your child is 15 years old because they could age out of eligibility at age 16.
Donate Investments to Charity
When you donate publicly traded securities, mutual funds, or segregated funds that have increased in value, you receive a tax receipt for the fair market value of the investment, and you will be exempt from any resulting capital gains tax.
Delay Home Buyers’ Plan withdrawals
The Home Buyers’ Plan (HBP) allows you to withdraw money from your RRSP tax-free for a down payment on a new home. Repayments begin three years following the year of withdrawal. Delaying your withdrawal until after year-end allows additional time before you must start repaying your RRSP.
FHSA
Finally, for those looking to purchase a home in the next 5 years, it may be beneficial to open a First Home Savings Account (FHSA) before year’s end. Not only will it help you save for a down payment, but similarly to the RRSP you will get a tax deduction on your contributions. You can contribute $8000 per year to a maximum of $40,000 over 5 years; however, you can carry forward one year of unutilized contribution room; so, you can open one now and contribute the maximum over the next four years. It is important to remember you don’t have to claim the deduction in the year you contribute, you can
carry it forward into a future year when you have a higher income; and would benefit more from the tax deduction.
If you have any questions or want to review your portfolio, please don’t hesitate to contact us.
Have a great weekend,
Tracey and Paige
Source: https://www.advisor.ca/podcasts/year-end-tax-planning-for-2023
Photo by Jakub Żerdzicki on Unsplash
Note: All mortgage related transactions are provided by Centum One Financial Group. Any information in the enclosed note is provided by Tracey Marshall who is a registered mortgage agent under the Financial Services Commission of Ontario. Centum One Financial Group is not affiliated or related to Security Financial