Year-end tax planning: Key strategies and important dates

Important dates and reminders in 2025

January 30: Prescribed interest payments due on prescribed rate loans.  

March 3: RRSP contribution deadline for the 2024 tax year is the first 60 days of 2025. March 1 is a Saturday, so the deadline is March 3.

April 30: Tax return deadline for individuals without self-employment income.

June 16: Tax return deadline for individuals (and their spouses) with self-employment income (since June 15 is a Sunday). Taxes owing are still due by April 30.

Note that there are alternate filing deadlines for trusts, corporations, and deceased individuals.

2025 contribution limits

• RRSP limit: Lesser of $32,490 or 18% of earned income for the previous year
• TFSA annual limit: $7,000
• FHSA annual limit: $8,000

Capital gains tax changes

Starting June 25, 2024, the portion of capital gains that is taxable will increase to 66.67% for individuals, corporations, and trusts. However, individuals and certain trusts will still benefit from a lower inclusion rate of 50% on their first $250,000 of annual capital gains but beyond this amount, the inclusion rate will be 66.67%.

Note: The changes to the capital gains inclusion rate have not yet received Royal Assent. However, the CRA will still administer these changes based on the motion tabled September 23, 2024.

Important note for tax-loss selling

If you sell investments at a loss to reduce your taxable gains, you have until December 30, 2024 to do so. Note the following for this year:

• Losses before June 25, will first offset gains from before that date.
• Losses on or after June 25 will first offset gains from on or after that date.
• If you have losses from one period and gains from the other, the losses will be adjusted to match the new tax rate but will still fully offset the gains.

Common tax credits and deductions

Credits

Charitable donations: A non-refundable credit on the eligible amount of donations up to 75% of net income for the current tax year.

Disability tax credit: A non-refundable credit to help individuals with a disability or their supporting family member reduce their taxes.

Digital news subscription: A non-refundable credit for amounts paid within the tax year, up to $500, to a qualified Canadian journalism organization.

Medical expenses: Eligible medical expenses exceeding 3% of net income or $2,759 (whichever is higher) can be claimed as a non-refundable credit for the taxpayer, their spouse, or children under 18.

Pension income amount: A non-refundable credit for up to $2,000 of eligible pension income. You can also split eligible pension income with a spouse or common-law partner.

Age amount: A non-refundable credit for individuals aged 65 or older at the end of the tax year.

Deductions

Home office expenses: Eligible home office expenses can be deducted from total income. Note: the temporary flat rate method (used from 2020 to 2022) is no longer available; the detailed method must be used.

RRSP contributions: Contributions to an RRSP in 2024 or within the first 60 days of 2025 can be deducted from total income, up to the RRSP deduction limit. Unused contributions can be carried forward.

FHSA contributions: Up to $16,000 of contributions to a First Home Saving Account can be deducted from total income (if you didn’t contribute anything the prior year). Note: FHSA contributions are based on the calendar year and the first 60-days rule for RRSP contributions does not apply.

Interest deductibility: Interest paid on funds borrowed to earn income from a business or property can be deducted from total income provided certain conditions are met.

Childcare expenses: Eligible childcare expenses can be deducted from total income. There are rules with respect to who can claim the deduction if both the individual and their spouse or common-law partner are eligible.

For personalized advice and a more in-depth discussion on year-end tax planning, please speak with your Manulife Wealth advisor.