Tax-filing season is long over, and the lazy days of summer are here. But that doesn’t mean it’s vacation time for tax planning.
Help clients build tax-efficient wealth — and avoid remorse when next tax-filing season arrives — by planning proactively. Here are three areas to focus on.
1. Charitable donations
The nonrefundable federal donation tax credit is 14% of the first $200 in donations and 29% thereafter (33% to the extent taxable income exceeds $258,482; find 2026 tax rates on the Canada Revenue Agency website). A provincial/territorial credit is also available.
A particularly tax-efficient strategy to consider is making an in-kind donation of publicly traded securities (or units of mutual funds or segregated funds) to a qualifying charity. Taxpayers receive a tax receipt for the securities’ fair market value and avoid capital gains taxes.
This in-kind donation could be shares with a large unrealized capital gain, shares from an insurance company demutualization with an adjusted cost base (ACB) of $0, or Series T funds for which the ACB has been ground down. “Those are great investments to think about donating in-kind, because you’re really maximizing the tax savings,” said John Natale, head of tax, retirement and estate planning services with Manulife Canada in Waterloo, Ont.
And if the in-kind donation of securities is made through a corporation, “it’s incredibly powerful, because you also get a bump in your capital dividend account of 100% of the capital gain” not included in income, Natale said.
Planning these donations earlier in the year provides plenty of time to implement the strategy, as well as consider potential exposure to alternative minimum tax (AMT) if donations are large.
AMT rules were updated beginning for the 2024 tax year. For example, the AMT exemption — the amount of adjusted taxable income below which AMT doesn’t apply — is $181,440 in 2026 for individual taxpayers. And 30% of capital gains on securities donated in kind is now included in adjusted taxable income (up from zero inclusion previously), and only 80% of the donation tax credit is permitted (down from 100%).
Jamie Golombek, managing director and head of tax and estate planning, and Debbie Pearl-Weinberg, executive director, with CIBC Private Wealth, provide examples of AMT, including when donating publicly listed securities, in a recent publication.
2. Other selected credits and deductions
If a client receives eligible pension income, they qualify for the nonrefundable federal pension tax credit on this income of up to $2,000 (pension income amount).
To benefit from the pension tax credit, clients aged 65 or older who aren’t currently receiving registered pension plan income can create eligible pension income by converting RRSP funds to a RRIF. “It can be just the $2,000 and you pull it out,” said Aurèle Courcelles, vice-president of tax and estate planning with IG Wealth Management in Winnipeg. “But you should be making sure you convert some of the RRSP to a RRIF … to get the benefit of the credit.”
For 2026, the credit is worth $280 (14% × $2,000), plus an additional amount for the applicable provincial or territorial tax credit (not available in Quebec). Claiming the federal pension credit over seven years, from age 65 to 71, would save $1,960 ($280 × 7) of federal income tax, essentially allowing the client to receive this income tax-free (or near tax-free, considering differences between the federal and provincial credit amounts).
The nonrefundable medical expense tax credit can be claimed when eligible medical expenses exceed the lesser of 3% of net income or $2,890 in 2026 (a provincial/territorial credit is also available).
Medical expenses are “much broader” than prescription drugs and medical fees, Courcelles said, and include a range of products and devices. Also, taxpayers can claim medical expenses for any 12-month period, ending in the relevant tax year. “Manage those more discretionary medical expenses,” such as large dental bills, “so you maximize that amount in a given 12-month period, not necessarily a calendar year,” he said.
Clients with significant non-registered assets and a mortgage could increase their deductions by using a debt swap* : the clients sell non-registered assets (taking tax into consideration), use the proceeds to pay off non-deductible mortgage debt, and then borrow to reinvest, with the interest being deductible. “You’re converting non-deductible debt to deductible debt — a way of managing one’s tax returns to increase deductions [and] reduce net income and tax payable,” Natale said.
Students can claim interest paid on qualifying student loans. Note, however, that students can’t claim interest on loans that aren’t government loans. Natale warned that if a student goes to a bank and refinances the loan at a lower interest rate hoping to save some money, this tax credit will be lost.
One of the most common deductions for students is moving expenses, whether incurred to be a full-time student at a post-secondary institution or to work, including for summer employment. The student’s new home must be 40 km closer to the new school or work location.
The nonrefundable home accessibility tax credit, for seniors and those eligible for the disability tax credit, is equal to 14% of expenses incurred for certain home renovations, up to $20,000 (the maximum credit is $2,800 in 2026). For 2026 and subsequent tax years, an expense claimed under the medical expense tax credit can’t also be claimed under the home accessibility tax credit.
The refundable multigenerational home renovation tax credit, for seniors and those eligible for the disability tax credit, is equal to 14% of expenses incurred to create a second unit in their homes for a relative, up to $50,000 (the maximum credit is $7,000 in 2026).
3. Registered plan contributions
If the client who typically makes their RRSP contribution at the March deadline makes the contribution now instead, they get several months of tax-deferred growth “as opposed to waiting until the first 60 days of next year,” Natale said.
He also noted that the client who turns 71 in 2026 and has RRSP contribution room can make a final contribution this year — by Dec. 31, not the first 60 days of 2027 — before the RRSP must be converted to a RRIF.
Natale added that clients should be reminded to update the beneficiaries when converting RRSPs to RRIFs. “The beneficiary designation doesn’t always follow through,” he said, given that the RRIF can be considered a new plan. (In Quebec, named beneficiaries on RRSPs and RRIFs generally aren’t allowed, with the exception of insurance investment products such as seg funds.) (Also, see sidebar below, “Ontario court case resolves uncertainty about beneficiary designations and registered accounts.”)
If the 71-year-old client has a younger spouse or common-law partner, the client can also contribute to a spousal RRSP up to Dec. 31 of the year the spouse or common-law partner turns 71, to make use of any unused contribution room that the client has. Note that attribution rules generally apply to spousal RRSP contributions made in the year of a withdrawal or the two years prior to a withdrawal, with the withdrawals taxed to the contributor.
Also, an RRSP contribution can be deducted in a different year than it’s made, as needed. “I can make the [RRSP] contribution, but if I think I’m going to … be in a higher tax bracket, I can carry that forward indefinitely as long as I stay within my contribution room,” Courcelles said.
Eligible taxpayers who want to save for their first home should consider contributing $8,000 — the account’s annual dollar limit — to a first home savings account (FHSA), Courcelles said. Contribution room for an FHSA begins to accumulate only once the account is opened (unlike with the TFSA).
“If you qualify for an FHSA, you get the best of both worlds,” Courcelles said — the tax deduction as with an RRSP, and tax-free withdrawals as with a TFSA.
And as with an RRSP, an FHSA contribution can be deducted in a future year. “That’s probably even more important with the FHSA,” Courcelles said, because the typical contributor is likely relatively young and in their lower-income years.
Unused contribution room for a year may be available for the following year to a maximum of $8,000 and subject to the account’s $40,000 lifetime contribution limit.
Ontario court case resolves uncertainty about beneficiary designations and registered accounts
With properly designated beneficiaries, registered account proceeds bypass the estate and probate process, thereby minimizing probate fees in many provinces and reducing administrative delays.
However, for several years, court decisions created some uncertainty about beneficiary designations and registered plans. A legal principle known as the “presumption of resulting trust” arose in disputes over registered accounts, “with some court decisions claiming that TFSA and RRIF proceeds could revert back into the estate and effectively override a deceased’s written designation,” writes Apeksha Jain, a lawyer with Sorbara, Schumacher, McCann LLP in Markham, Ont., in an article.
As such, documenting intentions when making beneficiary designations has been advised.
But an Ontario Superior Court decision from March (Kunka Estate v. Giasson) confirmed that the designations on registered plans are testamentary dispositions governed by the province’s Succession Law Reform Act and aren’t subject to the presumption of resulting trust, the article says.
The welcome ruling is “largely applicable” in Ontario, Jain said in an email, although “just as [Ontario] often looks to B.C. or other provinces for guidance in some instances, this case may serve that purpose as well.”
Still, documenting intentions when designating beneficiaries remains a good idea, “especially if the testator anticipates potential issues with the designations made,” she said. “While making the beneficiary designation is in itself an expression of your intention, making it clearer, if possible, would most certainly be helpful.”
*A previous version of this story described this debt conversion technique as a “Smith Manoeuvre.” In fact, it is a debt swap. Return to the edited sentence.