No need to panic just yet but November brings a reminder that 2025 is coming to an end.
There’s still plenty of time for investors to consider taking action to keep more tax dollars in their pockets in the new year.
Tax experts advise against making investment decisions solely for tax savings but some tax savings could tip the balance.
Most strategies apply every year but a client note this week from Scotia Wealth management warns that recent changes to the Alternative Minimum Tax (AMT) could impact that decision for high income earners.
AMT is calculated alongside regular annual personal income tax and restricts certain deductions, exemptions, and credits to ensure a minimum level of tax.
Here are some common strategies investors can use to keep more of their tax dollars invested.
Deferring or realizing capital gains
Half of capital gains on the sale of investments in non-registered accounts are subject to taxation in the year they are sold. Ottawa had proposed an inclusion rate of 66.67 per cent earlier in the year but backtracked to 50 per cent.
According to Scotia Wealth Management, if your income and marginal income tax rate might be lower in 2026 than 2025 due to your personal situation, consider waiting until January to sell.
In addition to lowering your overall tax bill, you won’t need to pay capital gains tax until 2027.
Turn losses into savings through tax-loss selling
Tax-loss selling brings an opportunity for investors to use 2025 stock market losses to recoup tax paid on capital gains in the past three years, or reduce tax on capital gains any year in the future.
Because half of capital gains on equities sold in a non-registered trading account are taxed, half of capital losses can eliminate the taxes on capital gains dollar-for-dollar.
The deadline for tax-loss selling this year is Dec. 30, which gives plenty of time to pluck out the losers.
As with any tax strategy, the Canada Revenue Agency (CRA) has strict rules when it comes to tax-loss selling.
The most important is called the superficial loss rule, which prohibits the repurchase of the same stock within thirty days of the tax-loss sale. The superficial loss rule applies to repurchases in any registered or non registered account in the name of the account holder, and even the account holder’s spouse.
If you want to repurchase the same stock you must wait at least 31 days from the sale.
Reclaim TFSA space by making a withdrawal
Tax-loss selling does not apply to investments in a Tax-Free Savings Account because capital gains – or any gains – in a TFSA are not taxed in the first place.
If TFSA contribution space is an issue, consider making a withdrawal before Dec. 31.
Under Federal government rules, contribution space from TFSA withdrawals is not renewed until the following calendar year. That means the dollar amount of withdrawals made in 2025 will be added to your available contribution space on Jan. 1 2026, along with a $7,000 increase for everyone.
If you make a withdrawal after Dec. 31, the additional contribution space will not be available until 2027.
Donate to a registered charity
Anyone can lower their 2025 income tax bill by donating to a registered charity before Dec. 31 and including the receipt with their tax return in the spring.
The tax savings in dollars depends on the size of the donation and income level of the individual.
If you donate shares or other securities directly to a charity, the tax on any capital gain is eliminated.
You can make a further donation of the tax savings or save your charitable tax credits for future tax returns within five years of the transaction.
The CRA will not recognize charitable donations to organizations not on the list.
