As we approach the end of 2025, now is a great time to revisit your tax planning and make sure everything is in order before December 31. A few small steps taken now can help you stay organized, avoid surprises at tax time, and make the most of the credits, deductions, and opportunities available to you.

Our year-end checklist highlights the key items worth reviewing so you can head into 2026 feeling prepared.

 Income Planning

• Review salary vs. dividends for business owners to optimize tax, CPP, RRSP room, and BC Employer Health Tax.
• Income splitting may be possible when family members provide reasonable services.

 Updated Tax Rates & Credits

• Top marginal tax rate remains 53.50% in BC.
• Lowest federal tax bracket dropped to 14.5% for 2025 (started 2025 at 15% and decreased July 1) and 14% in 2026.
• Dividend tax rates unchanged.

 Lifetime Capital Gains Exemption

• Increased to $1,250,000 for qualified small business shares and farm/fishing property.

 Principal Residence Rules

• Only one property per family can be designated each year.
• “Plus-one” rule only applies if you were a Canadian resident in the year the property was acquired.
• All sales must be reported on your tax return (Schedule 3 + Form T2091).
• Penalties apply for late designations.

 Anti-Flipping Rules

• Federal rule: properties held less than 365 days may be taxed as business income.
• BC’s new flipping tax (2025+): applies to properties held less than 730 days, with potential combined rates up to 73.5%.
• Exceptions exist but are complex review before selling.

Trusts & TOSI

• Trust income not paid to beneficiaries by Dec. 31 is taxed at the top rate.
• Expanded Tax on Split Income (TOSI) rules apply to many adults receiving income not aligned with their contribution to a business.

Capital Loss Planning

• You can realize losses to offset capital gains.
• Final trade date for most securities: Dec 30, 2025.
• Must wait 30 days before repurchasing to avoid superficial loss rules.
• Losses cannot be triggered by transferring investments into RRSPs or TFSAs.
• Unused losses can be carried back 3 years or forward indefinitely.

 RRSP Planning

• Last day to contribute for 2025 deduction: March 2, 2026.
• 2025 contribution limit: 18% of 2024 earned income, up to $32,490.
• If you turn 71 in 2025, you must wind up your RRSP by Dec 31.
• Spousal RRSP contributions offer income-splitting benefits.

TFSA

• 2025 and 2026 contribution limit: $7,000.
• Lifetime limit for someone who’s never contributed: $102,000 as of 2025.
• Over-contributions are subject to a 1% per month penalty.

First Home Savings Account (FHSA)

• Annual limit: $8,000; lifetime max: $40,000.
• Contribution room starts only once the account is opened—consider opening before Dec 31, 2025.
• Contributions are deductible; withdrawals for qualifying home purchases are tax-free.

Other Registered Plans

• RESP contributions earn 20% CESG, up to $500–$1,000/year.
• RDSPs offer grants up to $3,500/year for eligible beneficiaries.

Additional Planning Tips

• Defer bonuses to January 2026 if helpful for tax planning.
• Review interest deductibility and consider restructuring loans used for investment.
• Investment counseling fees for non-registered accounts may be deductible.
• Keep accurate automobile logs to optimize taxable benefit reporting.
• Buying business assets before year-end may accelerate deductions.

Credits & Deductions

• Charitable donations must be made by Dec 31.
• Childcare expenses, medical expenses, adoption expenses, and moving costs may be deductible.
• Home Accessibility Tax Credit allows claims up to $20,000 of eligible expenses.
• Educator supplies credit remains available for teachers/ECEs.

 Families & Benefit Programs

• File tax returns for all family members to maintain eligibility for:
• Tax-Free Savings Account room
• Canada Child Benefit
• BC Family Benefit
• GST credit
• RRSP contribution room
• RDSP (if eligible)

Foreign Property Reporting

• Form T1135 required if you hold more than $100,000 in specified foreign property.
• Enhanced reporting for holdings over $250,000.

U.S. Citizens in Canada

• Must file U.S. tax returns on worldwide income.
• Returns due April 15, 2026, with automatic extension to June 15 (taxes still due April 15).

source: www.canada.ca