Personal tax planning checklist 2025: Tips to save on your personal taxes

As we approach the end of the year, it's a good idea to think about personal income tax planning now so that you can maximize tax savings in 2025 and be prepared when final tax payments are due.

Since individuals are taxed on a calendar year basis, Dec. 31, 2025, is generally the last date for transactions that affect 2025 personal income taxes. So even though your personal tax return won't be due until April 30, 2026 (or June 15, 2026, if you or your spouse/common-law partner is self-employed), there are good reasons to consider tax planning opportunities now before it's too late.

Below are some strategies to help you manage your tax costs through effective personal tax planning and year-end decision-making. Keep in mind that while not all these strategies may apply to your situation, a trusted BDO advisor can assist you with your tax planning needs.

Consider selling investments with accrued losses

If you've realized capital gains in 2025 or in one or more of the last three years, consider selling assets with an accrued capital loss to offset these gains. To include a disposition of marketable securities in your 2025 tax year, you need to sell them on or before the stock exchange's last trading day for settlement in 2025, which is generally Dec. 30 for Canadian exchanges. For other transactions, legal ownership must be transferred before the end of the year.

If you decide to undertake a tax-loss selling strategy, be aware that superficial loss rules may apply to deny losses on certain dispositions of property. In particular, the loss will be denied if you, your spouse/common-law partner, or a company you or your spouse/common-law partner control repurchase the asset you disposed of for a loss within 30 days of the disposition.

Understand the alternative minimum tax (AMT)

The federal AMT is a parallel tax calculation for individuals and trusts that allows fewer deductions, exemptions, and tax credits to be deducted compared to the regular income tax rules. A taxpayer pays AMT or regular federal income tax, whichever is higher in the year.

While many taxpayers would not have an AMT concern, especially given that the exemption amount is over $177,000 in 2025, it can have a significant impact on certain taxpayers, including those who recognize substantial capital gains, utilize the lifetime capital gains exemption, exercise employee stock options, or make large charitable donations in the year.

If you end up paying AMT this year, the amount may be recovered during the seven-year carry-forward period but only to the extent that regular federal income tax exceeds AMT in the year. For certain taxpayers, this may be a concern. Speak with a BDO tax advisor  to see if there are strategies that can help you recover the AMT paid, and to understand the AMT implications prior to undertaking significant transactions.

Pay amounts eligible for deduction or credit

Many items that are creditable or deductible for tax purposes must be paid by the end of the year. These amounts include alimony and maintenance, childcare expenses, investment counsel fees, professional dues, charitable donations, medical expenses, and political contributions. To ensure that you will benefit from the tax deduction or credit in 2025, be sure that you pay these amounts by Dec. 31.

Consider donating securities

If you plan to donate money to a registered charity, you should consider donating publicly listed securities you own instead of cash. If there is an accrued gain on your securities, donating the shares directly to the charity can save on capital gains taxes that you would otherwise incur. For more information on this tax planning strategy, read our article: How donating securities to charity saves you tax.

However, while the donation of publicly listed securities will normally result in no capital gain for regular income tax purposes, 30% of these capital gains is included in the calculation of adjusted taxable income used for AMT. In addition, only 80% of the donation tax credit would be allowed for AMT purposes. As such, individuals considering making significant charitable donations should carefully consider the AMT implications.

Manage your medical expenses

In the case of medical expenses, only amounts exceeding $2,834 (limit may vary by province or territory) or 3% of net income (whichever is less) are eligible for a credit. In Quebec, eligible medical expenses must be reduced by 3% of the family income.

If your medical expenses for the current year are already over the threshold and you anticipate that you won't have medical expenses above next year’s threshold, consider advancing payment to this year for additional expenses that will arise soon.

Although most medical expenses are only paid as the medical services or supplies are required, some can be paid in advance. Glasses and contact lenses are two common examples. If you're paying for a major expense such as braces on an instalment basis, consider paying the balance owed early to maximize your medical credit claim.

On the other hand, you may have no medical expenses that can be paid in advance. In that case, keep in mind that you can claim eligible medical expenses paid in any 12-month period ending in a given year. To further clarify, consider the following scenario:

• your medical expenses incurred in the 2025 calendar year don't exceed the threshold;
• you need major dental surgery;
• those dental procedures will run from October 2025 to March 2026;
• the total cost will be about $5,000, split evenly between 2025 and 2026; and
• your other eligible medical expenses will total about $1,000 in each of 2025 and 2026.

In this scenario, you wouldn't claim any medical expenses in 2025, and you could choose the 12-month period ending on Sept. 30, 2026, as the period to claim medical expenses on your 2026 income tax return. You can then claim all the dental expenses incurred over the annual threshold, plus the other $1,000 of regular medical expenses incurred in the 12-month period ending Sept. 30, 2026. Note also that medical expenses eligible for the tax credit evolve over time, and you should check the Canada Revenue Agency (CRA) website for a list of common medical expenses that qualify for the credit.

Prevent expense deductions from being denied on short-term rentals

If you rent out a residential property for short periods of time through platforms such as Airbnb or Vrbo, you may be aware of the rule that denies expense deductions on non-compliant, short-term rentals. Specifically, a non-compliant short-term rental is, at any time, a residential property that is offered for rent for a period of less than 90 consecutive days that:

• is located in a province or municipality that does not permit the operation of a short-term rental; or
• is non-compliant with any of the registration, licensing, and permit requirements in the locality in which the property is located.

Where this rule applies, expenses incurred in the taxation year in respect of the short-term rental cannot be deducted for income tax purposes. If the rental was non-compliant for part of a year, then the total amount of expenses would be pro-rated to determine the portion of expenses that would be non-deductible. As such, it is advisable to ensure compliance each year so that you can deduct expenses incurred on your short-term rental to reduce your income tax liability for the year.

Manage your registered retirement savings plan (RRSP)

An RRSP is an effective retirement savings vehicle that offers a tax deduction on contributions up to certain limits, earnings on assets within the plan accumulate tax-free, and funds are only taxed upon withdrawal. However, there are certain deadlines and rules that must be kept in mind:

Contribute to your RRSP by the deadline

To be deductible for 2025, your RRSP contribution must be made on or before March 2, 2026. If you want to know how much you can contribute for 2025, check your RRSP contribution limit either on your 2024 notice of assessment, or online using the CRA's My Account service.

Your contribution limit for 2025 is 18% of your 2024 earned income (to a maximum of $32,490) minus your 2024 pension adjustment, if any, plus any RRSP room carried forward from prior years.

Collapse your RRSP in the year you turn 71

Also, remember that if you turn 71 in 2025, you must collapse your RRSP by the end of the year. At that time, you can pay tax on the fair market value of the plan's assets, purchase an annuity, or transfer your RRSP into a registered retirement income fund (RRIF). No tax is paid at the time of the purchase of the annuity or at the time of conversion into an RRIF. Note that despite collapsing your own RRSP, you may still be able to contribute to a spousal or common-law partner RRSP, provided that such contributions are made no later than the end of the year in which your spouse or common-law partner turns 71.

Sell non-qualified investments in your RRSP

There are specific rules as to the types of assets your RRSP can hold. If you have a self-directed RRSP, you may have purchased assets that don't qualify, referred to as non-qualifying investments. Qualified investments generally include money, guaranteed investment certificates, bonds, mutual and segregated funds, and securities listed on a designated stock exchange.

If non-qualifying investments are acquired or existing investments become non-qualified, a tax equal to 50% of the amount of such investments will apply to the RRSP holder. Where the non-qualifying investment is disposed of, the tax will be refunded if certain conditions are met. If the purchase and sale are in the same year, the tax and the refund will generally be offset. If you find that you have non-qualifying assets in your RRSP, it will be beneficial to dispose of the non-qualifying assets before Dec. 31.

Make your required home buyers’ plan (HBP) repayment

If you participated in the HBP prior to 2022, you may have a repayment due in 2025. Generally, you have up to 15 years to repay the HBP loan from your RRSP and a minimum amount must be paid each year that you have a HBP balance. However, temporary relief was introduced to defer the start of the repayment period by an additional three years for taxpayers who make a first withdrawal from their HBP between Jan. 1, 2022, and Dec. 31, 2025. As such, the repayment period begins in the fifth year (instead of the second year) following the year in which the first withdrawal was made. For example, if you made a first withdrawal in 2023, your first year of repayment will be 2028 (instead of 2025).

The CRA issues an annual HBP statement of your account. Your total required repayment amount and 2025 minimum repayment amount will be shown on that statement.

If the minimum repayment isn't made, you will be required to include the shortfall from the minimum payment in your income. To ensure the minimum annual HBP repayment isn't included in your taxable income for 2025, the required amount must be repaid to your RRSP on or before March 2, 2026.

A repayment can be made by making a regular contribution to your RRSP. Repayments to your HBP don't affect your RRSP deduction limit. This means that you can still contribute to your RRSP and designate that amount as a repayment under the HBP, even if your RRSP deduction limit is zero.

Pay interest on low-interest loans

If you entered into an income-splitting arrangement with family members by loaning your personal after-tax funds to a spouse or common-law partner, a minor child, or a family trust at the CRA's prescribed rate in effect at the time the loan was made, you should ensure that the interest is paid to you before Jan. 30, 2026. If the interest isn't paid on time, the loan will be subject to the attribution rules and the income earned by the family member who received the loan will be taxed in your hands.

Also, if you received a low-interest loan from your employer at any point in the year, you should ensure that interest is paid before Jan. 30, 2026, to avoid a deemed taxable employment benefit. This benefit will also be calculated at the CRA's prescribed rate for the period that the loan was outstanding, minus any interest actually paid.

Note that if you received a loan by virtue of your shareholdings rather than employment, a different set of rules will apply. In addition, the tax on split income rules could affect loans from private corporations to certain family members. If you or your family members borrowed money from your corporation, contact your BDO advisor to discuss whether there are any income tax implications arising from the loan.

Reimburse costs associated with company cars

If your employer provides you with a company car, a taxable benefit will be included on your T4 slip. The actual benefit is made up of two parts:

1. A standby charge for making the automobile available for your use. It's calculated based on a percentage of the original cost or the monthly lease payments for the automobile. This benefit is calculated on a daily basis for each day that the car is made available to you. As such, to lower the amount of the taxable benefit, you should consider reducing the number of days between now and the end of the year that the car is available to you, and limit personal driving to no more than 50% of your total driving for the year.
2. An operating benefit applies if your employer pays the automobile's operating expenses, such as gasoline and maintenance. A portion of the employer-paid operating expenses will be a taxable benefit if you've driven the automobile for personal purposes. In 2025, this benefit is equal to $0.34 per personal kilometre driven.

The standby charge and the operating benefit are reduced by the amounts you pay to your employer. For a standby charge reduction, your payment must be made on or before Dec. 31, 2025. For an operating benefit reduction, you will have until Feb. 14, 2026, to make a reimbursement to your employer to reduce your taxable benefit.

Check your personal income tax instalments

If you're required to pay tax instalments, now is a good time to check to see if you're up to date on your 2025 payments. If you've paid the instalments on the notices sent to you by the CRA for 2025 and plan to make the required final payment by Dec. 15, 2025, you're up to date.

If you paid less than the amount on the CRA notice because you thought that your income for 2025 would be less than 2024, you should check to see if you've paid enough.

If you haven't paid your tax instalments, the CRA will charge you interest at the prescribed rate, which is currently 7%. If you find that you haven't paid enough instalments based on your estimated income for 2025, you can make an overpayment on your instalment account to generate an offset to some or all the interest charges that will otherwise be assessed. Check with your BDO advisor for assistance to determine whether this is a good strategy for you.

Note that individuals whose main source of income is self-employment income from farming or fishing are only required to make one instalment payment, which is due by Dec. 31.