Year-End Tax Planning: 5 Moves to Make Before December 31

The calendar year is winding down, and what you do before December 31 can have a real impact on your tax bill. Here are five moves every Canadian investor should consider before the year ends.

1. Max out your TFSA

TFSA contribution room resets on January 1, and any unused room carries forward. But if you have cash sitting around, getting it into your TFSA before year-end means it starts compounding tax-free sooner. Every day counts when it comes to compound growth.

2. Harvest tax losses

If you hold investments in a non-registered account that are sitting at a loss, consider selling them before December 31 to realize the capital loss. You can use capital losses to offset capital gains from earlier in the year, reducing your tax bill. Just be aware of the superficial loss rule — you can't buy back the same investment within 30 days.

3. Open an FHSA (if you haven't)

If you're a first-time home buyer and you haven't opened a First Home Savings Account yet, do it before year-end. Even if you contribute $0, opening the account starts the clock on your carry-forward room. That's $8,000 of room you'll lose forever if you wait until next year.

4. Contribute to your RESP

The Canada Education Savings Grant matches 20% on the first $2,500 per child per year. If you haven't contributed $2,500 yet this year, you're leaving up to $500 in free government money on the table.

5. Plan your RRSP contribution

You have until March 1 of next year for RRSP contributions that count for this tax year. But start planning now — figure out your marginal tax rate and how much room you have. If you're expecting a bonus or higher income this year, an RRSP contribution can significantly reduce your tax bill.