Since many tax strategies require foresight to be effective, tax planning should be a year-round activity. However, as year-end approaches there are still opportunities to consider for reducing your 2026 tax bill. The following information relates to year-end tax-savings strategies that may be available, depending on your personal situation.
1. Tax-loss selling and planning around capital gains
Deadline: December 30
Wednesday, December 30, 2026, is expected to be the last trade date for securities to settle in 2026, under a T+1 settlement cycle (i.e., trade date plus one business day). You may want to review your non-registered investment portfolio to consider the sale of any securities with accrued losses to offset any capital gains realized in 2026. Any remaining net capital loss can generally be carried back to any of the three previous taxation years or carried forward indefinitely to offset taxable capital gains realized in the future.
As always, it is important to ensure that a tax-loss sale makes sense from an investment perspective, and review the superficial loss rules before selling. A loss can be denied if you or an affiliated person, such as your spouse or common-law partner or a corporation you control, acquires the same or identical property during the period beginning 30 calendar days before and ending 30 calendar days after the disposition, and still owns or has a right to acquire it at the end of that period. Review purchases across taxable and registered accounts. Reacquiring the same or identical investment in an RRSP or TFSA can result in a permanently denied loss.
Alternatively, if you have realized capital losses during the year, it may be beneficial to consider triggering capital gains before the end of the year to absorb those losses. This may be of particular interest because capital losses carried forward to future years may have limited effectiveness for Alternative Minimum Tax (“AMT”) purposes. For AMT purposes, only 50% of a capital loss can be used to offset future capital gains, which may result in a higher AMT exposure. As such, realizing gains in the current year to offset existing capital losses may offer a more favorable tax outcome.
Lastly, if you realized a capital gain in the year and will be receiving sale proceeds over multiple years, consider whether claiming a capital gains reserve is appropriate. A reserve allows you to defer a reasonable portion of the capital gain, recognizing it over the various tax years in which payments are received (up to a maximum period). Spreading the capital gain across multiple taxation years may result in a lower overall tax liability by taking advantage of (lower) marginal tax brackets. Eligibility, the timing of amounts due, AMT and the risk of non-payment should also be considered.
2. Charitable donations and other tax credits/deductions
Deadline: December 31
Instead of donating cash to a charity, consider donating appreciated publicly-traded securities. This strategy provides a charitable tax receipt based on the value of the securities donated, while potentially eliminating the capital gains tax otherwise payable on these securities if they were sold. In order to receive a tax receipt for 2026, you must ensure all charitable donations are made on, or before, December 31, 2026. Start in-kind donations early, as financial institutions and charities may have earlier administrative cut-offs. Ensure to also review unclaimed donation receipts from prior years and your prior year tax returns, since unclaimed donations can be carried forward for up to five years. In determining the extent of their charitable giving for 2026, large donors may also wish to consider the potential impact of AMT because for AMT purposes only, 80% of the donation credit can be claimed, and 30% of the capital gain from the donation of the security is included in income.
December 31 is also the final payment date for many other tax deductions or credits that can be claimed on your 2026 tax return, such as childcare, medical, tuition and interest expenses.
3. Pension income
Deadline: December 31
If you are not already taking full advantage of the Federal Pension Income Tax Credit, consider creating up to $2,000 of eligible pension income in 2026. If you are 65 years of age or older on December 31, 2026, converting a portion of your Registered Retirement Savings Plan (“RRSP”) into a Registered Retirement Income Fund (“RRIF”) to receive up to $2,000 of qualifying RRIF income before the end of the year could allow you to benefit from this non-refundable credit. The $2,000 is the eligible income amount, not a $2,000 tax refund. Consider the tax on the withdrawal, its effect on income-tested benefits and the mandatory RRIF withdrawals beginning in the following year. Eligible couples may also benefit from electing to split up to 50% of qualifying pension income.
4. TFSA withdrawals
Deadline: December 31
If you’re planning to make a Tax-Free Savings Account (“TFSA”) withdrawal in the near future, consider making the withdrawal in December instead of waiting until 2027. This way, the amount withdrawn will be added back to your TFSA contribution limit on January 1, 2027 (rather than 2028). Ensure to not recontribute a 2026 withdrawal in 2026 unless you have sufficient unused contribution room. The 2026 annual TFSA dollar limit is $7,000; reconcile your own records across all TFSAs, as CRA account information may not reflect recent transactions.
5. RRSP contributions for those turning 71
Deadline: December 31
If you turned 71 years of age in 2026, your RRSP must mature by the end of this year. Consider making a final contribution towards your RRSP if you have unused contribution room, prior to closing it. If you have earned income in 2026 that will generate RRSP deduction room for 2027, consider making your 2027 RRSP contribution in December 2026. While you will be charged a one per cent penalty tax for the month of December, the tax savings on your RRSP contribution (which can be claimed on your 2027 tax return) should exceed the penalty tax.
Note: If you have available deduction room and a younger spouse or common-law partner, you may continue contributing to a spousal RRSP until the end of the year they turn 71.
6. Payment of quarterly tax instalments
Deadline: December 15
Many Canadian investors are required to make quarterly income tax instalment payments since tax is not deducted at source on investment income. You may be required to pay income tax instalments if your estimated net income tax payable for the year, and net payable for either of the two preceding years exceeds $3,000 ($1,800 for Quebec residents). Personal tax instalments are due four times a year, with the final instalment generally due December 15.
If you fall short on any required instalments, non-deductible interest or penalties may be incurred. Therefore, it is important to determine if your year-to-date instalments are sufficient – in light of these requirements – based on your estimated income tax payable for the year.
7. Tax-free First Home Savings Account
Deadline: December 31
Introduced in 2023, the tax-free First Home Savings Account (“FHSA”) is a registered savings account allowing first-time home buyers to save up to $40,000 towards the purchase of their first home. Combining hallmark attributes of RRSPs and TFSAs, eligible contributions made into the FHSA are generally tax-deductible in the year of contribution or a future year and income earned in an FHSA is not subject to tax. Qualifying withdrawals (including investment income) from the FHSA, to purchase a first home, will be non-taxable and no repayment to the registered plan is required. First-time homeowners who are at least 18 years of age or older, are eligible to open an FHSA, subject to an annual contribution limit of $8,000 (plus any carryforward available from the previous year to a maximum of $16,000), with a lifetime limit of $40,000. However, unlike an RRSP, contributions to an FHSA must be made before the end of the calendar year to provide a current year deduction; eligible first-time home buyers should therefore consider opening an FHSA and making a contribution before the end of 2026. Opening an account also starts the maximum participation period (15 years) to which these accounts are permitted to be open.
Note: The FHSA can be used together with the Home Buyer’s Plan (HBP) for the same qualifying home, if both sets of conditions under the two programs are met. The HBP permits eligible RRSP withdrawals of up to $60,000 for a qualifying home purchase. Unlike an FHSA qualifying withdrawal, an HBP withdrawal must generally be repaid (under specific terms) to the RRSP.
8. Alternative Minimum Tax (AMT)
First introduced in 1986, the AMT is a parallel tax calculation designed to ensure that high-income earners pay a minimum level of income tax each year and cannot reduce their tax to a low amount through extensive use of deductions, exemptions or credits. Significant changes to the regime took effect starting with the 2024 taxation year and continue to apply for 2026. These changes broadened the AMT base, further limited tax preference items (i.e., exemptions, deductions and credits) and increased the federal AMT rate to 20.5%. For 2026, the basic AMT exemption for individuals is $181,440 and is indexed annually. Most family trusts are not entitled to this exemption. Individuals most likely to be affected include those realizing substantial capital gains (which are included at 100% for AMT income purposes), claiming the lifetime capital gains exemption, receiving significant dividend income, or making large charitable gifts. As noted previously, investors with significant gains or losses should also note that net capital losses carried forward from other years are effectively applied at only 50% for AMT purposes, while current-year losses fully offset gains for AMT. Any additional AMT paid can generally be carried forward for seven years and applied against regular tax, to the extent that regular tax exceeds AMT in those years. Individuals expecting large (preferentially taxed) income/exemptions or a large donation event should consider modelling both regular tax and AMT before year-end.
9. Employee Ownership Trusts
An Employee Ownership Trust (EOT) is a form of employee ownership in which a trust holds shares of a corporation for the benefit of the corporation's employees. EOTs can help employees buy a business without having to pay for the shares directly. For business owners, an EOT is another succession planning option alongside a third-party sale or a transfer to family. Since 2024, owners who sell to a qualifying EOT may be able to shelter up to $10 million of capital gains from tax. Legislation passed in 2026 made this exemption permanent. It had been scheduled to end after 2026. The rules also allow other favourable tax treatments such that the capital gain may be eligible to be reported over as many as 10 years, spreading out the ultimately tax liability on sale and recognizing that business owners may not receive their full proceeds upfront on a sale to EOTs. Because EOTs come with strict qualifying conditions, business owners thinking about a sale or employee transition should speak with their tax and legal advisors to see whether an EOT fits their goals.
10. Education and disability savings
Deadline: December 31, 2026
Review Registered Education Savings Plans (RESP) contributions before year-end. A $2,500 contribution can generally attract $500 of basic Canada Education Savings Grant (CESG); where unused grant room is available, up to $1,000 of basic CESG may be available on a $5,000 contribution, subject to eligibility review and the lifetime grant limit. For an eligible Registered Disabilty Savings Plan (RDSP) beneficiary, review contributions and grant/bond applications, particularly if the beneficiary turns 49 in 2026, the final year for grant and bond entitlement.
Seek professional advice
These tips are neither a comprehensive review of the subject matter, nor a substitute for professional tax advice. Be sure to consult with your external tax and legal advisors to confirm the suitability of any of these strategies for your personal situation.
For more information on these tax planning tips, please speak with your BMO Private Wealth professional.