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Tax Tips for Year-End

Year-End Strategies to Help Reduce Your Taxes

Here are some common year-end strategies that could help you reduce your 2024 tax bill.

Before December 15
Do you make quarterly tax installments?

    Make your final payment to the Canada Revenue Agency (CRA) on or before December 15 to avoid interest charges and late payment penalties. Missed an earlier payment deadline? Consider making a larger payment before December 15 to reduce interest charges.

Before December 31
Take advantage of tax-loss selling strategies.
  • If you have capital gains this year (sold an investment for more than you paid for it)—and you’re holding securities with unrealized capital losses (an investment that will sell for less than you paid for it)—consider selling the securities to realize the losses and offset the capital gains. Note that trade settlement must take place on or before December 31 to apply to this year’s tax bill.
  • If your capital losses this year are more than your capital gains, the unused capital loss may be carried back three years or carried forward indefinitely.
Defer capital gains.
  • Consider deferring to sell investments with unrealized capital gains to next year, if you think your tax rate will be lower in 2025.

Note: the Capital Gain inclusion rate is proposed to increase from 50% to 66.67% for capital gains realized on or after June 25, 2024. For individuals, the increase applies to annual gains exceeding $250,000.

Talk to an RBC Financial Planner to get additional information on your investments and speak to your tax advisor to see if these strategies are right for you.

Before December 31
Take advantage of tax-smart investing.
  • Contribute to your RRSP/spousal RRSP up to your available contribution room now to reduce your 2024 taxable income while maximizing the tax-deferred growth in your plan.
  • Contribute to a TFSA to earn tax-free investment income.
  • The TFSA contribution limit for 2024 is $7,000. You may also have unused contribution room if you haven’t maximized your contributions in previous years.
  • Thinking of making a TFSA withdrawal? Do so before year-end so you can recontribute the amount as early as January 1.
  • View your available contribution room for 2024 by using the My Account service on the CRA website.
  • Saving for a child’s post-secondary education? Contribute to an RESP before the end of the year to make the most of tax-deferred growth and government grants.
  • Contributions to an RESP are subject to a lifetime contribution limit of $50,000 per child.
Turning 71 in 2024 and have earned income?
  • Even if you have no carry-forward room but have earned income that will generate RRSP contribution room in 2025, consider making a final RRSP contribution before the end of 2024 which can be claimed as a deduction on your 2025 tax return.
  • Since the contribution is made before the end of 2024, an over-contribution penalty tax of one percent per month will apply on any amount greater than $2,000.
Make a charitable donation.
  • Donate to a registered charity to claim the tax credit on your 2024 tax return.
Put your year-end bonus to work.
  • Reduce your withholding taxes by transferring your bonus directly to your RRSP (if your employer allows this and you have unused contribution room).
  • Expect to be in a lower tax bracket next year? Consider deferring your bonus to early 2025 (if allowed by your employer).
Moving to a different province or territory? Plan your timing.

Generally, you’re taxed based on where you live on December 31. Consider:

  • Moving before year-end if you’re going to a province or territory with a lower tax rate.
  • Waiting until 2025 if you are moving to an area with a higher tax rate.
Pay tax-deductible expenses.
  • Pay all investment management fees, deductible legal and accounting fees, childcare expenses, alimony and medical expenses by December 31 to deduct them on your 2024 tax return.
Before January 30
Interest on family loans is due.
  • If you set up a spousal loan or funded a family trust with a prescribed rate loan, remember that the interest owing for 2024 must be paid by January 30, 2025. The borrower may be able to claim a deduction for the interest paid on their tax return.
Before March 3
Take advantage of unused RRSP contribution room.
  • Make any final contributions to your RRSP/spousal RRSP on or before March 3, 2025 in order to deduct the amount on your 2024 tax return.

All of these strategies may not apply to you, so it’s a good idea to speak with a qualified tax advisor and a financial planner to decide what is right for you.

Before December 31
Pay your salaries and/or dividends.
  • Consider paying reasonable salaries to yourself and family members who work in your business before your company’s year-end. This payment will increase RRSP contribution room for 2025 and give your business a tax deduction in 2024.
  • Speak with your tax advisor to determine whether the salary is reasonable and to review the possible application of the Tax on Split Income (TOSI) rules before paying dividends to any other family members.
Declare your bonuses.
  • If your business is incorporated and you require income from your corporation, consider declaring a bonus before the end of the corporation’s tax year and pay the amount within 180 days following the end of the corporation’s tax year.
  • If the business declares a reasonable bonus on December 31st (assuming that’s your year-end), it will get a tax deduction for 2024, provided that the bonus was paid within 180 days after December 31, 2024. And since you receive the bonus in 2025, the tax you have to pay on that bonus will be deferred by a year.
  • Speak with your tax advisor to determine whether the bonus is reasonable.
Repay your shareholder loans.
  • If your business is incorporated and the corporation loaned you money, be sure to pay the loan back within one year following the end of the taxation year of the corporation in which the loan was made to avoid having to include the value of the loan on your personal tax return.
Purchase assets for your business.
  • If your business needs new computers, furniture or equipment, consider buying it before year-end so that you can claim depreciation on the asset for tax purposes in 2024, provided that the assets were available for use in 2024.
Anytime during the year
Set up an Individual Pension Plan (IPP).
  • If your business is incorporated, you can use an IPP to save for retirement and reduce your year-end corporate tax bill.
  • An IPP is similar to many large company-sponsored plans, except it’s established and sponsored by your company and designed for you as the only member.

All of these strategies may not apply to you, so it’s a good idea to speak with a qualified tax advisor and a financial planner to decide what is right for you.

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RBC Financial Planning is a business name used by Royal Mutual Funds Inc. (RMFI). Financial planning services and investment advice are provided by RMFI. RMFI, RBC Global Asset Management Inc., Royal Bank of Canada, Royal Trust Corporation of Canada and The Royal Trust Company are separate corporate entities which are affiliated. RMFI is licensed as a financial services firm in the province of Quebec.