Canada Tax Planning Strategies Guide
the tax planning strategies in Canada. The prescribed rate loan — the "loan to the spouse or the family trust at the CRA prescribed rate (5% in the Q2 2025)" — the "investment income earned ABOVE the prescribed rate is taxed in the hands of the loan recipient (the spouse or the trust)". The attribution rules — the "income from the property transferred to the spouse is attributed back to the transferor" — the "capital gains from the property transferred to the spouse are attributed to the transferor". The spousal RRSP — the "contributions to the spousal RRSP are deducted from the contributor's income" — the "withdrawals are taxed in the hands of the spouse (if no further contributions in the year or the 2 prior years)". The pension income splitting — the "up to 50% of the eligible pension income can be transferred to the spouse for the tax purposes". The RRSP contribution deadline — the "March 2, 2026 for the 2025 tax year". The TFSA contribution deadline — the "December 31, 2025 for the 2025 tax year (the room is available on January 1)".
Income Splitting Strategies
- Spousal RRSP: The "higher-income spouse contributes to the RRSP in the name of the lower-income spouse". The "contributor deducts the contribution from the income". The "spouse withdraws at the lower tax rate". The "attribution rule: the withdrawal is attributed to the contributor if the withdrawal is made in the year of the contribution or the 2 subsequent years".
- Prescribed rate loan: The "loan from the higher-income spouse to the lower-income spouse at the CRA prescribed rate". The "interest must be paid at the prescribed rate by January 30 of the following year". The "investment income above the interest is taxed in the hands of the borrower".
- Family trust: The "transfer of the investment assets to the trust with the family members as the beneficiaries". The "income and the capital gains are allocated to the beneficiaries at the lower tax rates". The "prescribed rate loan to the trust: the interest at the prescribed rate avoids the attribution".
- Pension income splitting: The "up to 50% of the eligible pension income (the RRIF, the annuity, the employer pension) can be transferred to the spouse". The "election is made on the tax return (the form T1032)".
Year-End Planning Checklist
- Before December 31: The "realize the capital losses to offset the capital gains (the tax-loss harvesting)". The "make the charitable donations (the postmarked by December 31)". The "pay the eligible medical expenses". The "contribute to the RESP and the RDSP to maximize the government grants".
- Before March 2: The "RRSP contribution for the 2025 tax year". The "the contribution must be made by March 2, 2026 to deduct on the 2025 return".
- Before April 30: The "personal tax return filing deadline". The "self-employed filing deadline: June 15 (the balance due by April 30)".
Tax Deferral Strategies
- RRSP contribution: The "contribute to the RRSP to defer the tax on the contribution and the investment growth" — the "tax is paid on the withdrawal at the lower retirement rate".
- Capital gains reserve: The "defer the capital gain when the proceeds are received over the multiple years" — the "minimum reserve: 20% of the gain per year (the maximum 5-year reserve)".
- Corporate surplus retention: The "retain the active business income in the corporation" — the "corporate tax rate at 12.2% (Ontario)" — the "tax deferral of the 20%+ compared to the personal tax rate".
For the income splitting and the attribution rules, see our Income Splitting Guide →. For the tax-efficient investing and the asset location, see our Tax-Efficient Investing Guide →.