A smart tax plan doesn’t just maximize your registered accounts, it structures your finances in a way that optimizes every dollar you earn on the road to retirement – and beyond. It uses a range of financial strategies – from income splitting to trust structures to estate planning – to ensure your wealth grows in the most tax-efficient way possible.
Keeping up with the ever-evolving tax code isn’t easy, but here are a few savvy strategies you may not have considered.
Start with income splitting
One of the first strategies to consider is income splitting, which can help a family lower its overall tax bill by shifting income from the higher-earning individual to someone in a lower tax bracket. There are a few ways to do this:
Spousal RRSPs: One of the most common ways families can split income is through a Spousal Registered Retirement Savings Plan (RRSP). Here, a higher-income earner contributes into a Spousal RRSP for the benefit of their spouse or common-law partner and receives the tax deduction. The account is in the lower-earning partner’s name, so when they withdraw the funds, the income is taxed at their (lower) rate. Careful timing of withdrawals from Spousal RRSPs are required as attribution rules stipulate that if a contribution is made to a Spousal RRSP, any withdrawals within the same calendar year or the following two calendar years are generally taxed in the hands of the contributing spouse, not the spouse who owns the account. The higher earner can still withdraw funds from their own RRSP in retirement, but they may elect not to pull as much out because the lower earner has money to remove, too. If you turn 71 in 2026, your final contribution to your RRSP must be made by December 31, at which point it must be converted into an RRIF or other retirement income option. However, if, after turning age 71, the higher earner is still earning taxable income, has available RRSP contribution room, and their spouse is younger, they can continue making contributions into the Spousal RRSP as long as the account is open, providing continued income-splitting benefits.
TFSA room: If you’re maxing out your Tax-Free Savings Account (TFSA) contributions, but your partner (or child aged 18 or older) still has room, consider providing them with funds to invest. Since the income earned within a TFSA is tax-exempt and is not subject to any attribution rules, this is a simple and effective income-splitting option. Just be aware that it is the TFSA holder that makes the contribution (subject to their available contribution room).
Pension splitting: Those who receive a pension from their workplace(s) or RRIF withdrawals (at age 65 or over) can transfer up to 50% of eligible income to a spouse or common-law partner, which can significantly reduce the family’s tax bill when retirement comes.
Paying for expenses: Another useful strategy is to have the higher-earning partner cover most household expenses, allowing the lower-income earner to save and invest, which will be taxed at a lower rate and reduce the family’s overall tax burden.
Loan: A higher-income-earning spouse can also lend money to a lower-income-earning spouse or family member to invest through a “prescribed rate loan”. This can be helpful if all registered accounts are maxed out, as the lower earner can then invest those funds into a non-registered account and pay tax on the income generated from the invested securities at their lower marginal rate. You have to loan the money since a gift to your spouse would invoke the attribution rules. This means, though, that the borrower must pay interest on the loan each year by January 30 – although if the money is being used to invest in a non-registered account, the interest should be tax deductible for the borrower. The minimum prescribed interest rate set quarterly by the Canada Revenue Agency which must be charged on the loan to avoid the attribution rules. The current CRA prescribed rate is 3% (from January 1, 2026, to March 31, 2026).
Make your portfolio tax-efficient
With investing, market returns matter but so does minimizing the taxes that could eat into those gains. That’s why most experts suggest investing in a tax-deferred or tax-exempt registered account first. If you can invest in both registered and non-registered accounts, though, consider allocating your higher-taxed securities, such as bonds, where interest is fully taxable at your marginal rate, into a registered account. Next, you can allocate more-tax-advantageous investments, such as ones that could generate capital gains, where you would only pay tax on 50% of the gain, or dividend-paying stocks, which come with a preferential tax rate, into a non-registered account.
Donate appreciated securities
Charitable donations can be a great way to support a cause you care about while reaping tax benefits. Donating publicly traded securities that have appreciated in value, instead of cash, can be especially advantageous because you can avoid the capital gains tax that would otherwise be realized on the disposition resulting from that donation, and receive a tax receipt for the full amount of the donation. High-income donors can receive a federal tax credit of 33% on amounts over $200, with total savings approximating 50% when combined with provincial credits.
Use borrowed funds to invest
If you borrow money to invest in income-generating assets outside of a tax-sheltered account like an RRSP or TFSA, the interest is tax-deductible, provided the borrowed funds are used to generate investment income, such as interest or dividends (and not purely for capital gains). However, only borrow within your means, as you don’t want that debt to linger for too long.
Reduce tax for your estate
Naming a beneficiary for your RRSP or Registered Retirement Income Fund (RRIF) can significantly affect estate taxes. If your beneficiary is a spouse or financially dependent child/grandchild, taxes may be deferred or avoided by rolling the funds into their registered plan. If a rollover isn’t an option, the fair market value is reported on the deceased’s final tax return, and any gains after death are taxed to the beneficiary. Naming a beneficiary for your TFSA is also recommended, and if you have a spouse or common-law partner, naming them as a “successor holder” for a TFSA can simplify the administrative process and help maintain its tax-free status.
Also, establishing a testamentary trust, a type of trust stipulated in a Will that comes into effect upon death, can be an effective way to gain more control over how your assets are used by your beneficiaries. It can also come with some tax benefits, such as income splitting amongst your beneficiaries. Typically, income retained in a trust is taxed at the top marginal rates. However, within the first 36 months after death, the deceased individual’s unadministered estate can potentially take advantage of graduated tax rates if assets are not distributed during this period.
Consider U.S. estate tax implications if you own U.S. property
Many Canadians own U.S. property, whether that’s a second home or American stocks or bonds in their portfolio. If you own more than US$60,000 in U.S. investments or U.S. situs assets at the time of death, and your global estate is worth more than US$13.99 million in 2025, and US$15 million for deaths in 2026, you could be subject to U.S. estate taxes. Tax rates can range from 18% to 40%, depending on the value of your estate, and can include U.S. assets in an RRSP or TFSA. Fortunately, tax treaties and careful planning can help minimize the hit. Of course, as with any of these tips, talk to a professional to make sure you’re tax planning properly.
For more timely tax advice, be sure to check out BMO’s Tax Tips for Investors, 2026 Edition. For more personalized tax advice, it’s always a good idea to speak with your tax advisor.
