Eight tips to lower your 2025 tax bill

Most Canadians only think about their taxes when they file in March or April, but by then, it’s often too late to take advantage of the many tax-saving opportunities out there. Minimizing the tax on your hard-earned income is something you should pay attention to year-round. So what can you do today to lower your next bill? Here are a dozen ideas to get you started.

1. Make the most of RRSPs and other registered accounts.

For many Canadians, the biggest annual tax break comes from making contributions to a Registered Retirement Savings Plan (RRSP). Every dollar you put into your RRSP by March 2, 2026, up to your contribution limit, helps lower your 2025 taxable income. If your employer automatically withholds tax from your paycheque, you could get a tax refund for the amount you’ve already paid throughout the year. You can also consider putting that refund into your RRSP to decrease your tax bill for the following year.

Contributions to a First Home Savings Account (FHSA) work in a similar way. You can invest up to $8,000 per year (with a lifetime limit of $40,000), which helps reduce how much tax you owe. And you could potentially land a tax refund here, too. You must contribute by December 31, 2025, for the tax deduction to apply to the 2025 tax year. One big difference between the FHSA and the RRSP, besides the FHSA being specifically for buying your first home, is that withdrawals from an FHSA are tax-free as long as they’re used to buy or build a qualifying home.

Other registered accounts, such as Tax-Free Savings Accounts (TFSAs) and Registered Education Savings Plans (RESPs), don’t offer the same up-front deductions on your 2025 tax bill, but they do offer tax advantages. Investments in a TFSA grow tax-free and can be withdrawn tax-free, while investments in an RESP grow tax-deferred and will be taxed in the hands of the beneficiary, who typically has a lower marginal tax rate.

2. Write off your investment losses.

No one likes to lose money in the market, but if you sell stocks at a loss in a non-registered investment account, that loss may still provide some value to your portfolio by offsetting any capital gains. This strategy is called “tax-loss harvesting” or “tax-loss selling.”

For example, if you need to pay $1,000 in capital gains tax after selling an investment, consider dumping an asset that’s declined the same amount. The loss and the gain zero each other out, resulting in no taxes owing. (You will have to properly document and declare the loss on your tax return.)

If the loss is greater than your realized gains in 2025, you can carry the net loss forward to offset future gains and therefore save taxes in another year. You can also carry it back up to three years to offset past gains, which will reduce taxes paid in a previous year and potentially result in a refund.

When making investing decisions, tax implications aren’t the only factors to consider. A financial advisor can help you balance tax efficiency with achieving your financial goals. 

3. Don’t miss out on tax credits and deductions.

There is no shortage of tax credits and deductions to take advantage of: the former decreases the total amount of tax you have to pay, while the latter reduces your taxable income. You’ll find a wide range of credits and deductions covering things like child care, caregiving for parents, spousal support, out-of-pocket medical expenses, adoption, education, disabilities, pensions and more.

There are some key ones to keep in mind. If you’re a salaried employee who works from home, you may be able to deduct work-related expenses, including home office expenses; ask your employer to provide a T2200 form. How much you can claim depends on different factors, so it’s a good idea to talk to a tax professional before filing. You can also deduct a number of moving expenses if you’ve moved at least 40 kilometres closer to a new job or business.

One big reason people pay more tax than they should is because they don’t have the receipts they need to take advantage of a credit or deduction. Keeping track of receipts, plus tax-related forms or slips you’ll need, such as your T4 slip, throughout the year means you’ll have everything you need to claim credits and deductions come tax time.

4. Consider income-splitting strategies.

Canada’s progressive tax system means that the more you earn, the higher your tax rate. But there are opportunities for “income splitting,” which involves transferring income from a higher-earning individual to their spouse or child in a lower tax bracket.

A spousal RRSP is one possibility. If you have a spouse or a common-law partner, the higher-income earner can contribute to a spousal RRSP, which is held by the lower earner. Contributions reduce the taxable income of the higher-income-earning partner, potentially providing them with a tax refund, while withdrawals are taxed in retirement in the hands of the lower-income-earning partner.

Also, if the higher-income earner receives a pension, they can allocate up to half of the income they collect to their spouse, or share Canada Pension Plan payments, which can help balance your family’s collective tax liability.

Couples may have other tax-reduction opportunities, too. For example, if you use a non-registered account, the lower-earning partner could invest their income in that account, and the higher-earning spouse could allot their income to household and family expenditures. The advantage of this approach is that income and capital gains from the non-registered account held by the lower-earning spouse will be taxed at their lower rate.

Before implementing any income-splitting strategies, it is always worth consulting a financial advisor to make sure your plan meets your needs and you’re aware of any rules around each strategy.

5. Give to charities tax-efficiently.

Donations to registered charities in Canada are eligible for a non-refundable tax credit. To get tax receipts for the 2025 tax year, you’ll need to have made a donation by December 31, 2025.

How much you are eligible for depends on your tax bracket and province or territory of residence. At the federal level, the first $200 donation you make is eligible for a 15% tax credit. Any donations above that amount will qualify for a 29% credit (or 33% if you’re in the highest tax bracket). When you factor in the provincial rates, the tax credits could be worth about half the value of your donation. So instead of dropping toonies into a collection box at the supermarket, make your giving more tax-efficient by getting an official tax receipt from a qualified donee.

You can carry forward charitable donation tax credits for up to five years. If you have a spouse or common-law partner, you can also pool your donations to optimize tax credits.

Another option besides cash donations is to give securities, such as mutual funds, ETFs and stocks, in-kind. When you donate securities in-kind, you don’t pay any capital gains tax when they are transferred to the charity, yet you receive a tax credit for the full market value.

6. Separate personal and business expenses.

If you have business, property rental or self-employment income, get in the habit of separating personal and tax-deductible business expenses. There are many business expenses you can write off that won’t apply to personal taxes.

If the Canada Revenue Agency (CRA) were to conduct an audit on your company, you’ll need to show them the receipts. If you use the same credit card or bank account for personal and business expenses, sorting them can get confusing come tax time. Not only that but sorting out what expenses you can claim for your business is a lot harder to do when they’re mixed up with your personal spending.

7. Use accounting software and budgeting apps.

There are a growing number of accounting and tax-filing programs out there to help you track your tax-deductible expenses and contributions throughout the year. These programs can also help you find tax credits and deductions when it’s time to file. Look for NETFILE-certified tax software, which helps you submit your tax return directly to the CRA.

Also consider using a budgeting or expense-tracking app that can scan receipts and categorize spending into categories like travel, entertainment, office expenses and more. This can help you keep track of any eligible expenses you want to claim when you’re ready to file your tax return.

8. Hire a financial pro.

Even if tax software is getting easier to use, it’s still wise to hire a professional who can help make sure you’re paying the tax you owe and not a penny more. If you run a business, consider hiring a bookkeeper who can keep track of your bills and stay on top of all your expenses and income. Accountants can do more complex work, and they can also make sure you’re getting the paperwork needed to claim deductions and expenses. Your tax savings may even cover the cost, and, if you run a business or earn money from rental income, accounting services are often tax-deductible.

The bottom line

Making tax planning part of your regular budgeting and bookkeeping year-round can save you time, stress and money. Bookmark this page and keep an eye out for tax changes and new deductions as they come into effect.