2025 Year-End Tax Planning: Key Deadlines and Strategies

As 2025 winds down, there’s still time to make strategic decisions that can lower your tax bill and set you up for a stronger financial start in 2026. Although many taxpayers associate tax planning with filing season, the most effective opportunities often need to be completed before December 31. A thoughtful review now can help you take advantage of available deductions, avoid penalties, and respond to several meaningful tax changes coming into effect this year.

Below, we’ve outlined key considerations for individuals, trusts, and businesses—including approaching deadlines, planning opportunities, and notable 2025 tax updates. If any of these items apply to your situation, connect with your DMCL advisor for personalised guidance tailored to your goals.

What’s new for 2025

Several federal tax changes apply for 2025 and future years:

• Personal tax rate decrease: The tax rate for the first tax bracket (up to $57,375 of income) drops to 14% effective July 1, 2025.
• Underused Housing Tax eliminated: The tax is eliminated for the 2025 calendar year and onward.
• Luxury Tax eliminated: The Luxury Tax no longer applies to airplanes and boats effective November 5, 2025.
• Canada Disability Benefit introduced: Introduced June 2025, this program provides supplemental support to eligible Canadians with disabilities.

For Individuals

December tax instalment

If you’re required to pay tax by instalment, your final quarterly payment for 2025 is due December 15, 2025. The Canada Revenue Agency (CRA) considers electronic and in-person financial institution payments to be received on the day they’re made. A timely payment can help you avoid interest charges.

The CRA is currently charging 7% interest, compounded daily, on underpaid taxes. Insufficient instalments can also result in instalment penalties, so double-check your instalment reminder for the correct amount. You can pay online through My Account or in person with the printed form.

Tax loss selling

As markets fluctuate throughout the year, now is a good time to review your non-registered investment portfolio. If any securities have declined in value, you may be able to sell them before year-end to realize capital losses. These losses can offset capital gains realized in 2025, or be carried back to any of the previous three taxation years.

Since trades on most Canadian and U.S. stock exchanges settle the next business day, investors must complete any loss-realizing trades by December 30, 2025, for them to settle in the 2025 taxation year.

Before selling, consider the superficial loss rules, which apply if you (or an affiliated person) repurchase the same security within 30 days before or after the sale. If triggered, the loss will be denied and added back to the adjusted cost base of the repurchased investment. Planning around this rule is essential to avoid unexpected outcomes.

Registered account contributions

Tax-Free First Home Savings Account (FHSA)

If you opened a FHSA in 2025, you may contribute up to $8,000 for the year. If you opened one in a prior year, you can contribute the annual $8,000 plus any unused room carried forward, up to the $40,000 lifetime limit. Over-contributions are subject to penalties, so confirm your available room before contributing.

Registered Education Savings Plan (RESP)

Parents and family members can contribute $2,500 per child (up to age 17) by December 31 to receive the maximum $500 Canada Education Savings Grant for 2025. If contribution room has accumulated from prior years, a larger contribution might generate additional grant amounts.

Registered Retirement Savings Plan (RRSP)

RRSP contributions for the 2025 tax year are accepted until March 2, 2026. A contribution can reduce your taxable income and help build long-term retirement savings, but be sure to confirm your RRSP limit to avoid costly over-contribution penalties (1% per month on excess amounts).

If you turn 71 in 2025, remember that this is the final year to contribute to your RRSP. You must convert your RRSP to a Registered Retirement Income Fund (RRIF) or annuity by December 31, 2025.

Tax-Free Savings Account (TFSA)

Eligible Canadians (age 18+) can contribute $7,000 to their TFSA for 2025. Since TFSA withdrawals increase contribution room in the following calendar year, individuals who expect to withdraw funds soon may wish to do so before December 31, 2025, giving them the ability to recontribute the amount in 2026 rather than waiting until 2027.

Charitable donations

Charitable giving remains a valuable planning tool at year-end. Donating publicly traded securities “in-kind” can eliminate capital gains tax on the donated security and generate a charitable tax credit based on its fair market value.

However, the updated Alternative Minimum Tax (AMT) rules may affect high-income earners who make in-kind donations. If you expect AMT to apply, speak with your DMCL advisor to ensure your donation strategy aligns with your tax position.

Prescribed rate loan interest

Many families use prescribed rate loan arrangements to split investment income between spouses or with a family trust. To maintain the intended tax treatment, the 2025 interest must be paid by January 30, 2026. Missing this deadline can cause income attribution rules to apply, eliminating the intended tax benefit.

For trusts

Allocation of trust income

Trustees play a key role in year-end planning. Trustees must make resolutions to distribute or allocate any 2025 income or taxable capital gains to beneficiaries by December 31, 2025. Failure to do so could result in the trust paying taxes at the highest marginal rate, significantly increasing the tax burden.

A trust that incurs carrying charges and that distributes all of its net income to the beneficiaries might incur alternative minimum tax on 50% of the carrying charges incurred.

For businesses

Bonuses and dividends

If your business plans to pay year-end bonuses or declare dividends, doing so before your fiscal year-end ensures these amounts are deductible in 2025 (subject to usual rules).

Capital asset purchases

If your business is planning to make significant purchases of fixed assets in the near future, consider accelerating the purchases to 2025 to benefit from capital cost allowance (CCA) deductions in 2025.  The asset must be purchased and available for use in 2025 to be eligible for a 2025 CCA deduction. Also note that the 2025 Federal Budget introduced immediate expensing for certain types of fixed assets.

Timing of asset sales

If selling an asset in 2025 would generate recapture or a taxable capital gain, it may be worthwhile to postpone the sale until 2026. A small timing adjustment may defer tax and provide more flexibility in future planning.

Next steps

Whether you’re looking to maximize deductions, manage capital gains, or prepare for the new tax rules taking effect in 2025, year-end planning is one of the most effective ways to take control of your tax outcome. Our advisors can help you assess which strategies apply to your situation and ensure you’re well positioned for a tax-efficient 2026.

Connect with your DMCL advisor today to review your plan before the year wraps up.