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On March 5, personal finance reporter Erica Alini, Globe Advisor reporter Rudy Mezzetta and Aviso Wealth tax and estate specialist Doug Carroll answered reader questions on what to know to get ahead of this year’s tax season, any changes since last year and some tips to save money.
Readers asked about what’s different for 2025, how to best manage accounts for tax purposes, and changes at the Canada Revenue Agency. Here are some highlights from the Q&A.
Analysis: This will be a make-or-break tax season for the Canada Revenue Agency
Preparing to file your taxes this year
Are there any major changes to tax filing since last year? Or any credits that could save me money?
Rudy Mezzetta: The biggest tax change for 2025 was the drop in the lowest federal tax bracket to 14 per cent from 15 per cent. That kicked in July 1, 2025, halfway through the year, leaving us with a blended 14.5 per cent rate for 2025.
Now, most non-refundable tax credits (e.g., tuition, medical expenses) are calculated using the lowest tax-bracket rate, meaning the rate for these credits also decreased to 14.5 per cent. That makes these credits moderately less valuable. A small minority of taxpayers who claim significant non-refundable credits for 2025 could be left worse off, even accounting for the decrease in the lowest tax bracket, by the reduction in tax-credit rates.
To prevent this from happening, the government introduced (in Budget 2025) the Top-up tax credit, a temporary (from 2025-2030) non-refundable tax credit that effectively maintains a 15-per-cent rate for certain non-refundable tax credits claimed on amounts over the first income tax bracket threshold of $57,375 for 2025.
Are there any tax credits I can take advantage of as a new homeowner?
Doug Carroll: As a first-time homebuyer, you can take advantage of the Home buyers’ amount. The “amount” is $10,000, which is then multiplied by the tax-credit rate of 15 per cent, making it worth up to $1,500. It’s “up to” that amount because it is a non-refundable tax credit, meaning that if you owe taxes, then that figure reduces your tax bill, but not below zero. So for example, if you owe $1,200 tax, then that is as much as you’ll be able to claim.
If you’re purchasing with another person (often a spouse/partner) and you are both eligible, you can split the credit claim, but the total claim among you can be no more than that maximum credit (i.e., $1,500) in relation to a given home. To be considered “first-time,” mainly you and a spouse cannot have owned and lived in a principal place of residence in the current or four preceding years. Check out this CRA link on the Home buyers’ amount for further requirements.
Last year, tax information would not properly download from the CRA into tax preparation software. Has the CRA fixed this problem?
Erica Alini: Last year there was an issue tied to a CRA systems update that resulted in some tax-slip providers, like employers and banks, running into snags when uploading taxpayers’ data to the government’s portal. As a result, many people reported not finding all their tax slips in their CRA accounts.
This year, institutions should be more familiar with the new parameters for uploading slips, so hopefully we won’t see a repeat of what happened in the last tax season.
That said, it remains taxpayers’ responsibility to ensure all the appropriate information from their tax slips is included in their tax returns – whether or not all the slips made it to their CRA account.
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Can I still claim my business expenses even if I earned no income from the business?
Carroll: The net income (i.e., revenue less expenses) of a business run as a sole proprietorship is added to personal income, or will reduce personal income if the business has a loss in a year. If losses persist over multiple years, they still may be claimed, as long as there is a reasonable expectation of profit. If otherwise legitimate business expenses are being spent as in the past, but with no future prospect of profit, CRA may deny the losses. Check out these CRA links on sole proprietorship and business investment loss for more info.
Why is the CRA increasing the number of audits they conduct every year? How can I best avoid being audited?
Alini: The CRA has been stepping up audit activity thanks to bigger budgets for compliance work and better tools, such as AI, to spot high-risk files. I’m going to state the obvious here: The best way to stay on the CRA’s good side is to avoid mistakes and omissions in your tax return and make sure you have the paperwork to back up claims for tax credits and deductions.
That said, there are also specific high-risk areas that are more likely to attract the CRA’s scrutiny. Here’s a look at some of what tax experts say the agency is focusing on.
Has artificial intelligence begun to appear in the tax world? Wondering if it could be a good tool to help me file my taxes this year.
Alini: It absolutely has! The CRA is using machine learning and AI to help with audits and has an AI-powered chatbot that it is hoping will help reduce traffic to call centres. Some tax software companies have also rolled out their own AI chatbots.
So far, though, accountants are warning that AI is leading to a lot of errors. In a recent Canadian survey of accountants and bookkeepers, for example, roughly three-quarters of respondents said they saw an increase in business clients using AI and regularly see errors made by those who rely on large language models for tax or bookkeeping services. Here’s more about that survey.
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Managing your RRIF, RRSP, TFSA and other accounts
Can you please explain the tax benefits of switching from an RRSP to a RIFF once retired? How much tax do I save?
Mezzetta: A person has to convert their RRSP into a RRIF (or convert it into an annuity or withdraw it as taxable amount) by the end of the year they reach age 71. However, you can convert all or part of an RRSP to a RRIF before reaching age 71. You might consider converting an RRSP to a RRIF if you wanted to create eligible pension income (if you don’t have any other sources) for the purposes of claiming the pension income tax credit (for a credit of 14.5 per cent on up to $2,000 in eligible pension income) and/or for splitting eligible pension income with a spouse or common-law partner.
Is there a limit to the RRIF income that can be split with your spouse?
Mezzetta: Yes, there is a limit. You can allocate up to 50 per cent of your eligible pension income, which includes RRIF income, to your spouse or common-law partner. The transferring spouse must be 65 years or older to split RRIF income with the transferee spouse, who can be any age. To split eligible pension income, you and your spouse must file a joint election form with your tax returns. No money actually has to change hands to split pension income. Here’s a link to the joint election to split pension income form.
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My daughter is a Canadian-U.S. dual citizen and is required to file a U.S. tax return, but I am unable to register her name as a contributor to my RESP because that would require U.S. tax filing. What happens to the account upon my death?
Carroll: To open an RESP, both the subscriber and beneficiary must be Canadian residents. No further contributions may be made when/during the time a beneficiary is/becomes a non-resident, and thus no further/matching government support will be added to the account. The account itself may continue tax-sheltered. On death of an RESP subscriber, the plan becomes an asset of the estate, unless there is a joint-subscriber which must be a spouse/past spouse. There can also be a successor subscriber named in one’s will. The U.S. has education tax-sheltered plans (most often 529 plans) that may be easier to administer in this situation.
Why are dividends received in RRSPs not taxed as dividend income when they are withdrawn?
Carroll: There is no tax on any income received within RRSPs. Such amounts can be reinvested tax-sheltered, and full taxation applies on RRSP withdrawals (or more commonly in the form of a RRIF withdrawal). When Canadian dividends are received in a non-registered account, there is a two-step process that nets to a preferred tax rate. It would be very complex to mix the tax-sheltering within RRSPs with that special treatment of Canadian dividends, especially if it is years or decades until the ultimate draw into personal hands. As opposed to being double-taxed, it’s more that you’re not able to use both desirable tax treatments layered on top of one another.
Opinion: These tax changes might affect your filings this year
Wait times and tax credits
Have the CRA’s abysmal wait times improved?
Alini: The good news is that there has been an improvement. In September, Finance Minister François-Philippe Champagne announced a 100-day plan to improve the CRA’s service standards that forced the agency, among other things, to reverse recent cuts to call-centre staff.
In December, the CRA said it was answering on average 70 per cent of incoming taxpayer calls, up from 35 per cent earlier that year.
That said, the true test will come in the next few weeks, when incoming call traffic reaches the usual tax-season peaks.
How have the tax credits for work-from-home employees changed? Do we still get a deduction?
Carroll: During COVID-19, the government relaxed who and how claims were made for working from home. The rules have reverted back to the usual process: If you work from home, your employer completes Form T2200 and you complete Form T777 - Statement of Employment Expenses. This latter form provides some guidance on what types of expenses may be claimed.
Check with your employer about the T2200 well before year-end to make sure you have it in your hands in plenty of time to complete your tax filing in the new year. You cannot claim any expenses that were or will be reimbursed by your employer.
How does automatic tax filing work this year?
Alini: The short answer is that we’re not quite there yet. According to the CRA’s website, the government is targeting this fall for the rollout of a possible automatic tax-filing pilot and March of next year for providing prefilled returns for some one million eligible Canadians, with that pool growing to an estimated 5.5 million in 2029.
Keep in mind that automatic tax filing means the CRA would file a tax return on behalf of a limited number of low-income individuals who don’t owe tax and have simple tax situations.
That’s separate from Ottawa’s plan to provide pre-filled tax returns for millions of Canadians. More info here.
