Tax Season is Over - Now is Time for Tax Planning

Tax filing may be done, but smart Canadians know that tax planning is a year-round opportunity.

Why Plan Taxes After Filing?

The 2024 tax season in Canada officially ended on April 30 (June 15 for the self-employed). While most people breathe a sigh of relief, savvy individuals and business owners use this post-filing period to reassess their financial strategy. Why? Because now you have a full picture of your income, deductions, credits, and tax liability—and with eight months left in the calendar year, you still have time to make adjustments.

A Key Focus Area: Capital Gains

One of the most impactful areas to plan around this year is capital gains. As the Canadian tax landscape continues to evolve, capital gains are becoming a bigger part of the conversation, especially for investors, property owners, and business sellers.

What Are Capital Gains?

A capital gain occurs when you sell an asset—like stocks, mutual funds, real estate (other than your principal residence), or a business—for more than you paid for it. In Canada, 50% of the capital gain is taxable, and that amount gets added to your income for the year.  MoneySense – Capital Gains Tax ExplainedMoneySense+1Global News+1

Recent Developments: Proposed Capital Gains Inclusion Rate Increase Cancelled

In early 2024, the federal government proposed increasing the capital gains inclusion rate from 50% to 66.67% for individuals realizing annual capital gains exceeding $250,000, and for all capital gains realized by corporations and most trusts. This change was initially set to take effect on June 25, 2024, and later deferred to January 1, 2026 .

However, in March 2025, Prime Minister Mark Carney announced the cancellation of this proposed increase. The government will maintain the current 50% inclusion rate and uphold the increase in the lifetime capital gains exemption limit to $1.25 million for the sale of small business shares, farming, and fishing property .https://www.reuters.com/world/americas/canada-pm-carney-cancels-proposed-capital-gains-tax-increase-2025-03-21/?utm_source=chatgpt.com

This decision offers relief to investors, entrepreneurs, and business owners who were concerned about the potential tax implications of the proposed changes.

Tax Planning Moves to Make Now

Here are some tax-savvy strategies to implement now and before year end:

1. Maximize Registered Account Contributions

Use tax-sheltered accounts like TFSA, RRSP, FHSA, and RESP to protect investment growth and reduce taxable income.

2. Plan Charitable Donations

Bundling donations or gifting appreciated securities can generate generous non-refundable tax credits while supporting causes you care about.

3. Trigger Capital Losses in a Down Market (Tax-Loss Harvesting)

Markets are cyclical—and downturns can be a strategic opportunity. Selling investments that are currently below their adjusted cost base (ACB) can create capital losses, which you can use to offset capital gains now or carry back up to three years, or forward indefinitely.

Key considerations:

• Avoid the superficial loss rule by not repurchasing the same or identical security within 30 days.

• This strategy works best outside of registered accounts like RRSPs and TFSAs.

• Consider replacing with a similar but not identical investment to maintain market exposure.

4. Update Your Capital Dividend Account (CDA)

Private corporations may be eligible to pay out tax-free dividends from non-taxable portions of capital gains. Review your CDA balances regularly.

5. Consider Incorporating

Professionals and entrepreneurs may benefit from incorporating to defer income, take advantage of small business deductions, or split income with family members.

6. Track Adjusted Cost Base (ACB)

Accurate ACB records are vital to ensuring you don’t overpay on future capital gains. Many investors overlook reinvested dividends or corporate actions that affect their cost base.

Final Thought: It’s Not Too Early to Think About 2026

Tax planning isn’t about beating the system—it’s about playing smart within the rules. With the cancellation of the proposed capital gains inclusion rate increase, now is an opportune time to reassess your investment strategies and ensure you're making the most of available tax planning opportunities.

Meet with a qualified advisor or tax professional to review your situation. The best time to plan for next year’s taxes? Right now.