An ounce of prevention – As 2025 draws to a close, a quick review of your finances can help save you from tax filing regret down the road
After the slower and easier days of the summer, the fall months and early days of winter that lead into year-end always seem to evaporate. One useful and a bit surprise-inducing activity as the year winds down is to take stock of what has happened over the preceding months – useful because it can provide us insight into our successes and challenges, often surprising because of how much happens in such a short time and how quickly we tend to forget the important, and even seminal, events that have filled the days and months of the year.
2025 has been an exceptional year, and we still have a few more months to go. Equity markets have soared, delivering strong returns to patient investors who sat through the April swoon and remained disciplined throughout the “tariff terror” that has gripped the global economy. And it’s not just been in North America – European and Asian markets have delivered remarkably strong returns, too. The bond market has largely gained ground as yields have fallen, with some notable exceptions due to political turmoil (i.e., France).
On the political front, Canada changed governments – remember that? – ushering out the Trudeau government after a decade and ushering in the Carney team. President Trump was re-elected in the U.S. and promptly grabbed the spotlight with his tariffs and a sharp turn in America’s trade and economic policies.
On the financial side of the ledger, the federal government finally and officially ended plans to increase the capital gains tax inclusion rate, as well as cancelling the Carbon Tax (along with its related and more popular cousin, the Canada Carbon Rebate). The country stands poised for its first Carney budget in a few weeks, which should provide important insights as to where we stand, where we are going, and what financial and tax changes, if any, the new(ish) government plans to bring in.
Year-end checklist: Steps to consider before year end to avoid regret later
There’s nothing worse than discovering that it is too late to do something today that would have benefitted you and your financial circumstances had it been done earlier when you had the chance. The end of the year is typically the time that we can help avoid doing just that. Before December 31st, here are a few steps to consider to help ensure that you don’t miss out on key tax and investment benefits:
- Take advantage of tax-loss selling strategies: If you have capital gains this year and you are holding securities with unrealized capital losses, consider whether selling those securities to realize the losses and offset the capital gains makes sense for you.
- Defer your capital gains: If you anticipate that your tax rate next year will be less than this year, you may want to consider deferring the realization of capital gains to next year.
- Make RRSP/Spousal RRSP contributions: Contribute to your RRSP/spousal RRSP up to your available contribution room now to reduce your 2025 taxable income while maximizing the tax-deferred growth in your plan (and/or you can do this up to 60-days after year end). This is especially timely if you turned 71 in 2025 and have earned income: even if you have no carry-forward room but have earned income that will generate RRSP contribution room in 2026, consider making a final RRSP contribution before the end of 2025 which can be claimed as a deduction on your 2026 tax return.
- Make a charitable donation: Donate to a registered charity to claim the tax credit on your 2025 tax return.
- Contribute to a TFSA: The 2025 contribution limit is $7,000, and you may also have unused contribution room if you haven’t maximized your contributions in previous years. If you are thinking of making a TFSA withdrawal, doing so before year-end means you can recontribute the amount as early as January 1.
- Put your year-end bonus to work: Reduce your withholding taxes by transferring your bonus directly to your RRSP (if your employer allows this and you have unused contribution room). Also, if expect to be in a lower tax bracket next year, consider deferring your bonus to early 2026 (if allowed by your employer).
We can help
While the above is not an exhaustive list, and every taxpayer is different and has unique circumstances, the above are some of the more common actions you can take to help ease the pain of the tax season ahead. And, as always, you have the expertise and advice of your Investment Counsellor at your fingertips to ensure that you are making the right year-end moves – or any time of the year.
This document has been prepared for use by RBC Phillips, Hager & North Investment Counsel Inc. (RBC PH&N IC). The information in this document is based on data that we believe is accurate, but we do not represent that it is accurate or complete and it should not be relied upon as such. All opinions and estimates contained in this document constitute RBC PH&N IC judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. This document does not constitute an offer or a solicitation to buy or sell any security, product or service in any jurisdiction. This document is for information purposes only and should be used in conjunction with a discussion with your RBC PH&N IC Investment Counsellor. This information does not have regard to the particular circumstances or needs of any specific person, and does not constitute legal, investment, trust, estate, accounting, tax or other advice. Individuals should consult with qualified tax and legal advisors before taking any action based on the information contained in this document. Neither RBC PH&N IC, nor any of its affiliates, nor any other person accepts any liability whatsoever for any direct or consequential loss arising from any use of the information contained herein.
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