Legal Ways to Lower Your Tax in Canada

Most legal tax savings come from ordinary rules anyone can use. Registered accounts are the obvious place to start, but a forgotten credit or the timing of a sale can matter just as much. Which of these fits you depends on your income, your plans and your family.

RRSP contributions

Contributions to your RRSP can be deducted from your income, up to your RRSP deduction limit. The CRA generally works that limit out as your unused room from earlier years, plus 18% of your earned income from the previous year up to an annual maximum, less any pension adjustment from a workplace plan, with a few other adjustments. The annual maximum for 2026 is $33,810.

Going over can cost you. Generally, the part of your contributions that's more than $2,000 over your limit is taxed at 1% a month. You can contribute to your own RRSP until December 31 of the year you turn 71.

TFSAs and FHSAs

A TFSA works the other way around. Contributions aren't deductible, but the interest, dividends and capital gains earned inside are generally tax-free, even when you take the money out. The TFSA dollar limit for 2026 is $7,000. A withdrawal is added back to your room on January 1 of the next calendar year, not right away, so putting it back in the same year can be an over-contribution if you have no other room. TFSA income and withdrawals don't affect your federal income-tested benefits and credits.

An FHSA is for first-time home buyers saving to buy or build a qualifying first home, tax-free up to certain limits. Contributions are generally deductible. Your participation room is $8,000 in the year you open your first FHSA. Contributions and RRSP transfers over all the years you have one are capped at $40,000 in total, and some unused room can be carried forward. Transfers in from your RRSP aren't deductible.

Spouses and partners

You can contribute to your spouse's or common-law partner's RRSP, and the deduction comes out of your own deduction limit. The catch is attribution. If you paid into a spousal RRSP for them in the year they take money out, or in either of the two years before, all or part of that withdrawal may have to go on your return instead of theirs. You can contribute to a spousal RRSP until December 31 of the year your spouse turns 71.

With eligible pension income, you and your spouse can jointly elect to move up to 50% of it onto their return, using Form T1032, Joint Election to Split Pension Income. Only one joint election can be made for a tax year, and what counts as eligible pension income depends partly on your age (under 65, or 65 and older). Our post on pension income splitting goes through it.

Claiming what you're already owed

In most cases you don't apply for the Canada Groceries and Essentials Benefit (formerly the GST/HST credit) at all. You get it by filing a tax return every year, even if you have no income to report. New residents may need to apply for their first year. Credits like medical expenses and the disability tax credit are worth checking every year too.

Gifts to a registered charity or other qualified donee earn a non-refundable credit. Generally you can claim up to 75% of your net income for the year. You don't have to claim a gift in the year you make it. You can carry it forward to any of the next 5 years, but amounts carried forward have to be claimed before the current year's.

Timing capital gains and losses

When you sell an investment decides which tax year its gain or loss falls in. Losses can offset gains, and a net capital loss you can't use this year can be carried back three years or forward indefinitely. It can only be used against taxable capital gains, not your other income. Our post on investment income and capital gains has more.

Selling at a loss and buying straight back usually won't give you a deductible loss. It's a superficial loss if you, or someone affiliated with you such as your spouse or a corporation you control, buy the same or identical property in the 30 calendar days before or after the sale and still own it 30 days after. You can't deduct that loss, though it can usually be added to the cost of the property you bought back.

If you own a business

An incorporated owner can be paid by salary, dividends or a mix, and the choice affects more than this year's tax. Salary is employment earnings, which count toward the earned income that creates RRSP room. Our post on salary vs dividends walks through the trade-offs.

If you're self-employed or have rental or investment income without enough tax withheld, you may have to pay by instalments. Outside Quebec, you have to pay instalments for 2026 if your net tax owing is more than $3,000 for 2026 and was also more than $3,000 in either 2025 or 2024. Our post on how CRA instalments work has the details.

How we help

Lowering next year's tax is one of the things we sit down with clients about, along with incorporation vs sole prop, capital purchases, and financial and wealth planning. We read the numbers, explain what they mean for the decision in front of you, and show our reasoning so you can push back on it. When we prepare your return, we explain what we did in plain English and look for anything you're entitled to that might otherwise be left out.