Year-End Tax Prep: Essential Checklist for Maximizing Returns

As the year draws to a close, taking proactive steps to optimize your tax situation can significantly impact your bottom line. Many tax-saving opportunities disappear once December 31st passes, so now is the time to review your finances, maximize deductions, and make strategic decisions that can reduce your tax burden. This checklist covers essential year-end tax planning strategies every Canadian should consider.

The December 31st Deadline

Most tax deductions and credits must be claimed by December 31st of the tax year. This includes RRSP contributions (though you have until March 1st for the previous year), charitable donations, medical expenses, and many business expenses. Don't wait until tax season—act now.

Essential Year-End Checklist

Review these key areas before year-end:

RRSP Contributions: Maximize your contribution room to reduce taxable income and grow retirement savings.
Tax-Loss Harvesting: Consider selling investments at a loss to offset capital gains.
Charitable Donations: Make donations before year-end to claim the tax credit.
Medical Expenses: Pay for eligible medical expenses before December 31st.
Business Expenses: Incur and pay business expenses before year-end if you're self-employed.
RESP Contributions: Maximize government grants by contributing to RESPs before year-end.

Maximize Your RRSP

Your RRSP is one of the most powerful tax-saving tools:

Contribution Limit: Contribute up to 18% of your previous year's income or the annual limit ($31,560 for 2025).
Tax Deduction: Contributions reduce your taxable income, potentially moving you to a lower tax bracket.
Timing: You have until March 1, 2026 to contribute for the 2025 tax year, but contributing before year-end starts tax-deferred growth sooner.
Spousal RRSP: Consider contributing to a spousal RRSP for income-splitting benefits in retirement.

Common Deductions to Review

Ensure you're claiming all eligible deductions:

1. Medical Expenses: Keep receipts for prescriptions, dental work, vision care, and other eligible medical expenses.

2. Charitable Donations: Donations to registered charities provide tax credits—the higher your income, the more valuable the credit.

3. Home Office Expenses: If you work from home, you may be eligible to claim a portion of home expenses.

4. Investment Expenses: Fees for investment advice, safety deposit boxes, and certain investment management fees may be deductible.

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Frequently asked questions

When is the deadline for RRSP contributions?

You have until March 1st of the following year to contribute to your RRSP for the previous tax year. However, contributing before December 31st allows your money to grow tax-deferred for an extra few months. For example, contributions made by December 31, 2025 can be claimed on your 2025 tax return.

What medical expenses can I claim?

You can claim eligible medical expenses that exceed 3% of your net income (or $2,635, whichever is less). Eligible expenses include prescription medications, dental work, vision care, medical devices, and certain travel expenses for medical treatment. Keep all receipts and ensure expenses are paid before December 31st.

Should I make charitable donations before year-end?

Yes, if you're planning to donate, doing so before December 31st allows you to claim the tax credit on your current year's return. Charitable donation tax credits can be valuable, especially for higher-income earners. You can also carry forward unused donation credits for up to five years.

What is tax-loss harvesting?

Tax-loss harvesting involves selling investments that have declined in value to realize capital losses. These losses can offset capital gains, reducing your tax liability. If you have more losses than gains, you can carry forward unused losses to future years. This strategy must be completed before December 31st to count for the current tax year.