The holiday music is on repeat. The sun checks out way too early. And your to-do list? It’s somehow growing. It’s a crazy time of year. But in the middle of all that festive chaos, another deadline is sneaking up on you—one that could seriously fatten your wallet. We’re talking about the December 31st tax deadline. No, it’s not for filing. It’s for doing. So many of the best ways to slash your tax bill for the year have to be wrapped up before the ball drops on New Year’s Eve. Let’s dive into five key moves you, as a Canadian, should be thinking about before we flip the calendar.
1. Get a Tax Break for Your Generosity
Feeling generous this season? Awesome. The Canada Revenue Agency (CRA) actually rewards you for that. Any donations you make to registered Canadian charities by December 31st can be claimed as a tax credit on this year’s return. And this isn’t just a deduction—it’s a credit, which is way more powerful because it chops down the actual tax you owe, dollar for dollar.
Pro-Tip: Got some stocks or mutual funds that have shot up in value? Think about donating them directly. You not only get a donation receipt for the full market value of the shares, but you also completely sidestep the capital gains tax you’d have to pay if you sold them. It’s a truly brilliant win-win.
2. Turn Stock Market Dips into Tax Wins
The stock market is a total rollercoaster, right? Some days you’re up, some days you’re down. But what if I told you those ‘down’ moments could actually be a good thing for your taxes? There’s a savvy strategy for this called “tax-loss harvesting.”
Here’s how it works: If you have investments in a non-registered account (so, not your RRSP or TFSA) that are currently in the red, you can sell them. Why on earth would you do that? Because selling them ‘realizes’ the capital loss, and you can use that loss to wipe out capital gains you’ve made on other investments. It works on gains from this year, the past three years, or even future years. It’s the ultimate silver lining for a portfolio that’s taken a hit. Just a heads-up: the trade needs to settle by year-end, so don’t put this off until the 31st.
3. Pre-Pay Your Health Costs
From new glasses and dental implants to physiotherapy, a ton of medical expenses can be turned into a tax credit. The trick is, you can only claim what you actually paid for within any 12-month period that ends in the tax year.
So, if you know you’ve got a big dental bill or a medical procedure on the horizon, think about getting it done and paid for before December 31st. By paying now, you can lump that cost into this year’s claim. It might just be enough to push you over the threshold where the tax credit really starts to make a difference.
4. Final RRSP Call for Anyone Turning 71
For most people, the RRSP contribution deadline is a comfortable 60 days into the new year. But there’s one massive exception. The year you turn 71 is your last shot. Period. You have to make your final contribution to your own RRSP by December 31st of that year. If this is you, and you still have contribution room left, this is the absolute last call to top it up and grab that sweet tax deduction. Once the clock strikes midnight, your RRSP has to be converted into a RRIF or an annuity.
5. Team Up with Your Partner on Pension Income
Are you drawing an income from a company pension or a RRIF? You might be able to legally shuffle some of that income over to your spouse or common-law partner if they’re in a lower tax bracket. It’s a strategy called pension income splitting, and it lets you move up to 50% of your eligible pension income to their tax return.
This one simple move can effectively drop your entire household into a lower overall tax bracket, saving your family a ton of cash. You don’t have to physically move any money before December 31st, but you definitely need to have the conversation now to make sure you’re both on the same page when it’s time to file.
Don’t Let These Opportunities Slip Away
Whew. Okay, that’s a lot to chew on. The end of the year is a blur, we get it. But setting aside just a little bit of time for your finances right now can lead to a much happier April. These aren’t just fuzzy ideas; they’re real, concrete actions that can have a big impact on your bank account.
But here’s the thing: everyone’s financial situation is totally unique. A strategy that’s a home run for your neighbour could be a strikeout for you. Trying to figure out the Canadian tax system alone can be a headache. The best plan is always one that’s built just for you. If you’re scratching your head wondering which of these moves make sense for your life, or how to do them right, the smartest thing you can do is get in touch with an expert. A pro can help you squeeze every last drop of value out of these year-end opportunities and kick off the new year feeling financially confident.