Tax planning should be a year-round affair, but as year-end approaches, now is a particularly good time to review your personal finances and take advantage of any tax planning opportunities that may be available to you before the December 31st deadline. As we enter the final weeks of 2025, here are some tax tips you may wish to consider.
Tax-Loss Selling
Tax-loss selling refers to the practice of selling investments held in non-registered accounts that have declined in value near year-end to offset capital gains realized elsewhere in a portfolio. Any net capital losses that cannot be applied in the current year may be carried back three years or carried forward indefinitely to offset net capital gains in other years.
To ensure that a loss is realized for the 2025 tax year (or one of the prior three years), the trade date must occur by December 30, 2025, to allow the transaction to settle by December 31, 2025 (check with your broker to be sure the settlement date will be by December 31st).
When securities are purchased in a foreign currency, fluctuations in exchange rates can significantly impact the gain or loss once converted to Canadian dollars. For example, while an investment may show a loss in U.S. dollar terms, the foreign exchange rate could result in a capital gain for Canadian tax purposes. Investors should therefore calculate both the purchase and sale amounts in Canadian dollars before determining whether a tax-loss sale will achieve the intended result.
Superficial Loss Rules
The “superficial loss” rules apply when a security is sold for a loss and repurchased within 30 days before or after the sale date. These rules also apply if the repurchased property is still owned on the 30th day by the investor or an affiliated person, such as a spouse or partner, a controlled corporation, or a trust in which the investor or their spouse or partner is a majority beneficiary (including an RRSP or TFSA).
If these conditions are met, the capital loss is denied and instead added to the adjusted cost base (ACB) of the repurchased security. The denied loss can then only be realized when the repurchased investment is ultimately sold.
Transfers and Swaps
Transferring an investment with an accrued loss to a registered plan, such as an RRSP or TFSA, does not result in a deductible capital loss under Canadian tax rules. In addition, “swapping” an investment between a non-registered account and a registered account for cash or other consideration can result in penalties.
To avoid these issues, investors may consider selling the investment with the accrued loss and contributing the cash proceeds to a registered plan, provided sufficient contribution room exists. The registered plan may then repurchase the investment after the 30-day superficial loss period.
RRSP Contributions
Although RRSP contributions for the 2025 tax year can be made up to March 2, 2026, earlier contributions allow for a longer period of tax-deferred growth. The 2025 RRSP deduction limit is 18% of 2024 earned income, up to a maximum of $32,490, reduced by any pension adjustments and increased by unused RRSP contribution room or pension adjustment reversals.
Note: The normal 60-day deadline (March 1) falls on a Sunday in 2026, extending the deadline to March 2, 2026.
RRSP Withdrawals Under the HBP or LLP
Funds may be withdrawn from an RRSP without immediate tax under the Home Buyers’ Plan (HBP) or Lifelong Learning Plan (LLP).
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HBP: The withdrawal limit is $60,000. Typically, the first repayment is due in the second calendar year following the withdrawal. However, for HBP withdrawals made between January 1, 2023, and December 31, 2025, the first repayment is deferred to the fifth calendar year after withdrawal, effectively delaying repayment by three years if funds are withdrawn before January 1, 2026.
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LLP: Participants may withdraw up to $20,000 each for eligible post-secondary education. Repayments are required in annual instalments starting in the year specified under the plan. Withdrawing early in 2026, rather than late in 2025, can defer the start of repayments by one year.
TFSA Contributions and Withdrawals
The TFSA contribution limit for 2025 is $7,000. There is no annual contribution deadline, and cumulative contribution room for someone who has been a Canadian resident aged 18 or older since 2009 is $102,000 in 2025, assuming no prior contributions.
When funds are withdrawn from a TFSA, the equivalent amount is added back to the individual’s contribution room in the following calendar year, provided the withdrawal was not made to correct an over-contribution. Re-contributing the withdrawn amount within the same year without sufficient room can trigger penalties.
To avoid overcontribution issues, TFSA-to-TFSA transfers should be made directly rather than through withdrawal and re-contribution. Individuals planning early 2026 withdrawals may consider completing them by December 31, 2025, to regain the contribution room in 2026 instead of 2027.
Investment Expenses
Certain investment-related expenses must be paid by year-end to be deductible in 2025. This includes interest on funds borrowed for investing and investment counseling fees for non-registered accounts.
Fees related to investments held in registered accounts, such as RRSPs, RRIFs, or TFSAs, are generally not deductible. However, in some cases, it may still be advantageous to pay TFSA-related fees from outside the plan. The decision is more complex for RRSPs and RRIFs.
RRIF Conversion After Age 65
Individuals aged 65 or older without other sources of pension income may benefit from converting a portion of their RRSP (for example, $14,000) to a RRIF at age 65. By withdrawing $2,000 annually from ages 65 through 71, they may utilize the annual pension income credit and pay no tax on that income.
RRSP Conversion by Age 71
Individuals who turn 71 in 2025 must convert their RRSP to a RRIF or registered annuity by December 31, 2025.
It may be beneficial to make a one-time RRSP overcontribution in December 2025 if earned income for the year will generate additional RRSP room for 2026. A 1% penalty tax applies on the excess contribution (beyond the $2,000 permitted limit) for December 2025, but this penalty ceases in January 2026 when new contribution room becomes available. The overcontributed amount can then be deducted on the 2026 or a future tax return.
Alternatively, if a spouse or partner is younger, contributions can continue to be made to a spousal RRSP until the end of the year the spouse or partner turns 71.
This article is meant to provide only high-level insights as an individual Canadian taxpayer approaches the end of the calendar year and does not constitute, nor is a substitute for, professional tax advice. Please contact our office so that we may optimize your year-end tax position while considering all elements of your individual financial plan.