Know it before you file it: Insights from Michelle Munro and Jacqueline Power - March 25, 2026

Getting the basics right

Individual tax returns are due by April 30. Self‑employed individuals and their spouses have until June 15 to file, but any taxes owed are still due by April 30.

This time of year is about organization. Gathering all required slips early, including T4s, RRSP receipts and investment slips such as T3s and T5s, can help reduce last‑minute stress. These conversations can also open the door to broader planning discussions beyond tax filing.

Reviewing common deductions and credits

Several deductions and credits are worth revisiting each year, including:

• RRSP contributions, which generate receipts and can be used immediately or carried forward.
• First Home Savings Accounts (FHSAs), which may be particularly relevant for younger investors who choose to save deductions for later years.
• Childcare expenses, tuition, medical expenses and charitable donations.
• Eligible home office expenses, where a portion of costs such as utilities, maintenance and rent may be deductible, provided eligibility requirements are met.

Understanding T3 slips and investment income

T3 slips report investment income from mutual fund trusts and often prompt questions when distributions appear larger than expected. By the time tax season arrives, the income for the year has already been determined. That makes accuracy and completeness especially important when filing. Rather than reacting at filing time, these conversations can be used to introduce longer‑term tax planning considerations for non‑registered investments.

Tax‑efficient investing considerations

When reviewing non‑registered portfolios, structure matters. Trust structures generate T3 slips and may include interest income and foreign dividends, while class funds are reported on T5 slips and generally include capital gains and Canadian dividends. Understanding these differences can support future planning conversations.

Tax‑smart cash flow strategies may also be relevant for investors seeking regular income. Distributions are calculated annually and paid monthly and are predominantly return of capital. Because return of capital reflects an investor’s own money being returned, it does not increase net income in the year received, which may be relevant for income‑tested benefits such as OAS.

Borrowing to invest: key tax considerations

Borrowing to invest applies to non‑registered accounts and may allow interest deductibility, provided the borrowed funds are used to invest in assets with the potential to generate income. This approach aligns with broader tax principles that allow interest deductions when borrowing is undertaken to earn income.

Maintaining a clear paper trail is critical. Investors should be able to trace borrowed funds from the loan to the investment, especially if records are reviewed years later. Reasonableness of interest expense also matters, especially when borrowing from related parties. If return of capital distributions are reinvested, the borrowing trail remains intact. If those distributions are used for spending, only a portion of the interest may remain deductible. This type of strategy is typically suited to more sophisticated investors and requires careful planning.

Investment management fees and deductibility

Investment management fees may be deductible when they relate to managing or administering investments or advice related to buying and selling securities. Financial planning fees and commissions do not qualify.

How fees are paid also matters. Embedded fees are already reflected in reported investment income, while direct fees paid by investors must be reported separately as carrying charges. Hybrid structures exist as well. While the overall outcome may be similar, proper reporting remains important. Provincial considerations, including specific rules in Quebec, should also be taken into account.

Charitable giving as part of tax planning

Charitable donations must be made by December 31 to apply to the tax year, but planning can happen well in advance. Donating securities in kind may allow investors to eliminate capital gains on the donated securities while still receiving a donation receipt for fair market value.

Donation credits can be allocated between spouses to maximize their impact, and unused credits can be carried forward for up to five years. There are limits on how much can be used in a given year, although higher limits apply in certain circumstances. Before donating securities, it is important to confirm that the chosen charity can accept in‑kind donations.

Bare trust reporting: where things stand

Expanded trust reporting rules introduced in recent years created uncertainty, particularly around bare trusts. These arrangements generally involve situations where legal ownership and beneficial ownership differ, such as certain joint accounts or in‑trust arrangements.

Following concerns about scope and administrative burden, reporting requirements have been deferred and narrowed. Key exceptions include small trusts below certain thresholds, certain related‑party trusts and situations where parents co‑sign on a child’s property without beneficial ownership. Reporting has been deferred to a future tax year, and the rules continue to evolve.

Conclusion: Looking beyond filing season