As the year draws to a close, it’s a great time to take charge of your finances and ensure you’re making the most of every opportunity available. While taxes might not be the first thing on your mind during the holidays, a little planning now can go a long way toward saving money and reducing stress down the road.
These tips are designed to make tax season smoother and help you get the most out of your hard-earned dollars—all while keeping things simple and achievable.
Maximize Your RRSP Contributions
Your Registered Retirement Savings Plan (RRSP) is one of the most effective tools to reduce your taxable income. While the deadline for contributions is March 3, 2025, making room in your budget now can help you spread the expense over several months.
Take stock of your contribution room (this can be found on your latest Notice of Assessment from the Canadian Revenue Agency (CRA)) and consider automating your deposits to make the process hassle-free.
Contributing to an RRSP provides valuable tax savings when you file, while allowing your investments to grow tax-deferred, giving your retirement fund a solid boost!
Consider starting a spousal-RRSP as an income splitting strategy for when in retirement. Dividing your taxable income needs in retirement as best you can, is a great way to spread the tax burden across lower tax brackets.
Boost Your TFSA Savings
If you’ve got room in your Tax-Free Savings Account (TFSA), now is a great time to top it up. Remember, the maximum contribution for 2024 is $7,000!
Contributions to a TFSA aren’t tax-deductible like RRSPs, but the growth and withdrawals are entirely tax-free. This makes it an excellent tool for medium- to long-term savings goals or as an emergency fund.
Remember, unused TFSA contribution room carries forward, so if you’re unsure how much you have available, check with the CRA.
Don’t Forget About RESPs
If you’re saving for a child’s education, the year-end is a great time to review your contributions to a Registered Education Savings Plan (RESP). Contributions aren’t tax-deductible, but the government adds 20% to your contributions to the Canada Education Savings Grant (CESG) each year, up to $2,500 per child. That’s $500 of free money just for saving!
If you haven’t hit the $2,500 threshold this year, you can catch up by contributing more, as unused CESG room from previous years accumulates and can be used later. A RESP is a fantastic way to grow education savings tax-deferred while taking advantage of government grants to ease the financial burden of post-secondary education.
Organize Your Receipts
Have you been charitable this year? Made any medical expense payments? These could translate into valuable deductions or credits. Ontario residents can claim charitable donations for a federal tax credit of up to 29% and a provincial credit of 5.05% on a donation up to $200. By locating and consolidating all your receipts now, you’ll save time (and stress!) when filing your return.
Eligible medical expenses, such as prescription medications or dental work, can also provide significant savings if they exceed 3% of your net income.
Consider Tax-Loss Harvesting
If you have a non-registered investment portfolio, review its performance. Selling investments at a loss before year-end can offset gains elsewhere in your portfolio, reducing the amount of capital gains tax you owe. This strategy, known as “tax-loss harvesting”, is best done with the help of a member of Kindred’s Wealth and Investment team to ensure you comply with CRA rules.
Review Your Withholdings
Have you noticed a larger-than-expected tax refund over the past few years? While it’s nice to get a windfall, this often means you’re overpaying taxes throughout the year. Consider adjusting your withholdings with your employer to better match your actual tax liability. This gives you more take-home pay to invest or save immediately.
Final Thoughts
Year-end tax planning doesn’t need to be overwhelming. A few small actions now can lead to significant savings down the line. Whether it’s maximizing your RRSP contributions, organizing receipts, or taking advantage of tax-loss harvesting, the key is to plan ahead and use all the tools available to you.
While taxes may be inevitable, a proactive approach can turn them into an opportunity to strengthen your financial health and help you Make Peace with Your Money. For more information, meet with a member of Kindred's Wealth and Investment team today!