As the year begins to quickly draw to a close, it’s time to take stock of your finances and ensure your taxes are in order. For Canadians, this means making the most of the available deductions, credits, and tax-saving opportunities before the December 31 deadline.
Whether you’re a business owner, self-employed, or an individual taxpayer, these last-minute tax tips can help you maximize savings and avoid unnecessary stress when tax season arrives.
1. Maximize RRSP Contributions
Contributing to your Registered Retirement Savings Plan (RRSP) reduces your taxable income, which can significantly lower your tax bill – especially if you’re in a higher tax bracket. Every dollar you contribute works toward both short-term tax savings and long-term retirement growth.
Although the contribution deadline for 2024 is in early 2025, contributing before year-end allows you to take advantage of tax savings sooner and may simplify your financial planning.
To ensure you don’t over-contribute, check your RRSP contribution limit on your most recent Notice of Assessment from the CRA.
2. Make Charitable Donations
Donations to registered Canadian charities made by December 31 are eligible for both federal and provincial tax credits. These credits can offset your tax payable while supporting causes you care about.
It’s also important to note that larger donations often yield higher credits due to tiered rates.
Just be sure to get official receipts for all contributions and confirm the charity is CRA-approved to ensure eligibility.
3. Sell Investments to Harvest Capital Losses
If you’ve realized capital gains from investments earlier this year, you can offset those gains by selling underperforming assets to harvest capital losses. These losses can also be carried forward up to three years if you have no gains this year.
Keep in mind that trades must settle before year-end, so plan ahead and avoid repurchasing the same asset within 30 days to comply with the CRA’s superficial loss rules.
4. Prepay Certain Expenses
For self-employed individuals or business owners, prepaying deductible expenses before December 31 can reduce this year’s taxable income.
Consider paying for items like office supplies, professional subscriptions, or rent now, shifting the deduction into the current year.
This strategy helps lower your immediate tax liability and improves cash flow management heading into the new year.
5. Review Taxable Benefits and Bonuses
Employers often issue bonuses at the end of the year. If you’re expecting a bonus, you may want to negotiate deferring it until January to shift the tax liability to the following year, potentially keeping you in a lower tax bracket this year.
Similarly, taxable benefits like company vehicles, housing allowances, or gifts add to your taxable income, so review their value and plan accordingly to manage your taxes effectively.
6. Claim Medical Expenses
Medical expenses that exceed 3% of your net income (or a specific minimum amount) are eligible for a tax credit.
Gather receipts for all eligible expenses, including medical and dental treatments, prescription drugs, and even travel costs for accessing medical care. Many Canadians overlook smaller expenses like health plan premiums or medical devices.
By pooling family expenses, you may exceed the threshold, making it possible to claim this valuable credit.
7. Use Up Unused Tax Credits
Unused tax credits from previous years, such as tuition, education, or textbook amounts, can be carried forward and applied to your taxes.
Students or recent graduates may benefit by transferring unused tuition credits to a parent, spouse, or grandparent, maximizing the family’s overall tax savings.
And don’t forget other credits like the first-time homebuyer’s credit or caregiver credits (if applicable).
8. Pay Off Deductible Debt Interest
Interest on loans for investment purposes or mortgages on rental properties may be deductible.
To claim this deduction for 2024, ensure you pay off any accrued interest by December 31 and keep thorough records to document the purpose of the loan and the payments made.
It’s also important to note that personal loan interest, such as credit card debt, does not qualify for deductions under CRA rules.
9. Contribute to a TFSA for Tax-Free Growth
While Tax-Free Savings Account (TFSA) contributions don’t offer immediate tax deductions, they provide the advantage of tax-free growth on your investments. The annual limit is cumulative, meaning unused contribution room from prior years carries forward.
If you haven’t maximized your TFSA contributions, doing so now allows your investments to start growing tax-free sooner.
10. Organize and Save Receipts
Proper organization of receipts and invoices is a simple but effective way to prepare for tax season.
You can do this by categorizing both digital and physical receipts for expenses such as charitable donations, childcare, tuition, and medical costs.
Staying organized ensures you don’t miss out on any deductions or credits and helps you respond to potential CRA inquiries quickly and confidently.
Partner with Isaac Achal Professional Corporation
Wrapping up your year on a high note doesn’t have to be stressful. At Isaac Achal Professional Corporation, we specialize in personalized tax solutions tailored to your unique financial situation.
Whether you need help navigating RRSP contributions, claiming deductions, or optimizing your tax strategy, our experienced team is here to help. Contact us today to schedule a consultation and make the most of your year-end tax planning.
