The rules governing FSHAs differ from those for TFSAs and RRSPs, where contribution room accumulates regardless of whether someone opens an account or plan.Kenneth Cheung/iStockPhoto / Getty Images
Clients often think of the new year as a time to review tax and investment strategies for their registered plans. However, some tax-saving opportunities may be missed if they don’t act before Dec. 31.
From timing withdrawals to maximizing contribution room, here are some key tax-planning moves for registered plans to consider before the end of the year.
TFSA withdrawals
A client planning to withdraw from their tax-free savings account to fund an upcoming purchase should consider doing so before Dec. 31.
When a client withdraws from a TFSA, an equal amount is added to their contribution room for the following year.
For example, a client withdrawing $10,000 from a TFSA before the end of 2025 will have access to an extra $10,000 in contribution room next year (in addition to $7,000 in new contribution room for 2026.)
In contrast, if the client withdraws $10,000 early next year, they’ll have to wait until 2027 to access that extra contribution room.
“Just advancing an [expected] withdrawal slightly will give you the flexibility to recontribute in 2026 instead of having to wait a whole year again to put the money back,” says Aurele Courcelles, vice-president, tax and estate planning, at IG Wealth Management Inc. in Winnipeg.
Spousal RRSP contributions
Most clients think of February as the season to make registered retirement savings plan contributions, but those with a spousal RRSP may want to do so before Dec. 31.
A client who contributes to a spousal RRSP can claim a corresponding deduction against their income. When their spouse withdraws money from the RRSP, the amount generally will be taxable to the spouse making the withdrawal. If they’re in a lower income tax bracket than the contributing spouse, the couple will pay less in taxes through income splitting.
However, if the spouse withdraws the contributed amount within three years from the year of contribution, that withdrawn amount is “attributed” back to the person who made the contribution – meaning the amount is taxable in their hands, potentially defeating the income-splitting strategy.
If a client contributes to a spousal RRSP before the end of 2025 and makes no further contribution over the next two years, their spouse can withdraw the amount in 2028 without triggering the attribution rule.
RRIF conversions
Clients aged 65 and older who aren’t otherwise receiving pension income might consider converting at least part of an RRSP into a registered retirement income fund by Dec. 31 to create pension income that’s eligible for splitting with a spouse.
Before age 65, only certain types of pension income, such as the life annuity payment from a pension or annuity payments received due to the death of a spouse, are eligible pension income. At 65, RRIF withdrawals or life income fund withdrawals also become eligible pension income.
A client who is 65 or older can split up to 50 per cent of their eligible pension income with a lower-income spouse and reduce their income taxes.
In addition, allocating up to $2,000 in eligible pension income to a spouse who is receiving little to no pension income can ensure both spouses can access the pension income tax credit, which provides a credit of 14.5 per cent (in 2025) on up to $2,000 of eligible pension income.
Opening an FHSA
The rules governing first home savings accounts (FHSAs) differ from those for TFSAs and RRSPs, for which contribution room accumulates regardless of whether someone opens an account or plan.
In the year a client opens an FHSA, they can access $8,000 of contribution room. In the following years, they receive another $8,000 in contribution room, added to a maximum of $8,000 in carry-forward contribution room. The account is also subject to a $40,000 lifetime contribution limit.
A first-time homebuyer looking to buy a property should open an FHSA before Dec. 31 to give themselves the opportunity to contribute $8,000 and take a corresponding deduction for this year.
Even if they don’t contribute this year, they’ll have $16,000 in contribution room in 2026.
However, if the client waits until after Dec. 31 to open an FHSA, they’ll have only $8,000 in contribution room next year, missing out on potential tax savings.
Maximizing RESP grants
Parents (or other subscribers) who are behind on their registered education savings plan contributions should look at how they can catch up before Dec. 31.
The federal government will match 20 per cent of up to $2,500 in annual RESP contributions, for a maximum of $500 a year, with the Canada education savings grant. The lifetime CESG maximum is $7,200 per child (on contributions of $36,000). The maximum that can be contributed to an RESP is $50,000.
Subscribers can catch up to unused CESG carry-forward from previous years, but only to a maximum of $1,000 of CESG on a contribution of $5,000 in a year, until the year a beneficiary turns 17.
That means clients with a child turning 10 this year who haven’t opened an RESP must contribute by Dec. 31 to ensure their child can receive the maximum CESG amount.
Clients with older children should also consider contributing before the end of the year to avoid missing out on grants.
“Especially if my child is 16 this year, turning 17 next year, and I haven’t even opened an RESP or I have a lot of grant room to carry forward, then I may want to consider looking at a $5,000 contribution before the end of December and another $5,000 contribution next year,” to receive $1,000 in grants this year and next, Mr. Courcelles says.
RDSP contributions
Clients contributing to registered disability savings plans may also want to act before Dec. 31 if the beneficiary turns 49 or 59 this year.
The government will contribute Canada disability savings grants to an RDSP until the end of the year in which the beneficiary turns 49. For families with an income of $114,750 (in 2025) or less, a contribution of $1,500 would result in a $3,500 maximum CDSG. For those with higher income, a contribution of $1,000 will receive a maximum of $1,000 in CDSG. A beneficiary can receive up to $70,000 in grants over their lifetime.
Contributions to an RDSP are only permitted until the end of the year in which the beneficiary turns 59. The lifetime limit for contributions is $200,000.
Editor’s note: A previous version of this article incorrectly stated Aurele Courcelles' title. He is vice-president, tax and estate planning, at IG Wealth Management Inc.