Even Canadians who have no more than a basic knowledge of our tax system are usually aware that the deadline for making registered retirement savings plan (RRSP) contributions is March 1, and that contributions to one’s tax-free savings account (TFSA) can be made at any time during the tax year. As well, most Canadians who have opened a registered retirement income fund (RRIF) are aware that they are required to withdraw a specified amount from that RRIF each year, with the percentage withdrawal amount based on the RRIF holder’s age – although few are aware of when and how that required withdrawal is calculated.
Consequently, as the end of the calendar year, and therefore the tax year, approaches, most Canadians aren’t really focused on either making a contribution to (or a withdrawal from) any of their tax-deferred savings plans, whether an RRSP, RRIF, or TFSA.
That’s an unfortunate reality, as there are some instances in which December 31 is an absolute deadline for taking required steps with respect to one’s tax-deferred savings plans, and many more instances in which significant tax advantages can be obtained by acting before the end of the calendar year. What follows is an outline of steps which should (or in some cases must) be considered and implemented before the end of the 2025 calendar year, by Canadians who have an RRSP, RRIF, or TFSA – or maybe all three.
Timing of RRSP contributions
When you are making a spousal RRSP contribution
Under Canadian tax rules, a taxpayer can make a contribution to an RRSP in their spouse’s name and claim the deduction for the contribution on their own return. When the funds are withdrawn by the spouse, the amounts are taxed as the spouse’s income, at a (presumably) lower tax rate. However, the benefit of having withdrawals taxed in the hands of the spouse is available only where the withdrawal takes place no sooner than the end of the second calendar year following the year in which the contribution is made. Therefore, where a contribution to a spousal RRSP is made in December of 2025, the contributor can claim a deduction for that contribution on their return for 2025. The spouse can then withdraw that amount as early as January 1, 2028 and have it taxed in their own hands. If the contribution isn’t made until January or February of 2026, the contributor can still claim a deduction for it on the 2025 tax return, but the amount won’t be eligible to be taxed in the spouse’s hands on withdrawal until January 1, 2029. It’s an especially important consideration for couples who are approaching retirement and may plan on withdrawing funds in the relatively near future. Even where that’s not the situation, making the contribution before the end of the calendar year will ensure maximum flexibility in the event that an unforeseen need to withdraw funds arises.
If you turn 71 during 2025
Every Canadian who has an RRSP must collapse that plan by the end of the year in which they turn 71 years of age – usually by converting the RRSP into an RRIF or by purchasing an annuity. An individual who turns 71 during the year is still entitled to make a final RRSP contribution for that year, assuming that they have sufficient contribution room. However, in such cases, the 60-day window for making contributions after December 31 is not available. Any RRSP contribution to be made by a person who turns 71 during the year must be made by December 31 of that year. Once that deadline has passed, no further RRSP contributions are possible.
RRIF withdrawals for 2025
Under Canadian law, anyone who has an RRIF is required to make a minimum withdrawal from that RRIF each year. The amount of the withdrawal is calculated as a specified percentage of the fair market value of the property held in the RRIF at the beginning of the calendar year, with that percentage based on the age of the RRIF holder at that time.
Taxpayers who have no immediate need of funds held within an RRIF are often reluctant to make a withdrawal and pay the tax on those amounts, especially where the value of investments held in an RRIF have declined. While there is no way of avoiding the requirement to withdraw that minimum amount from one’s RRIF, and to pay tax on the amount withdrawn, such taxpayers can consider contributing those amounts to a TFSA. Where that is done, the funds can be re-invested and continue to grow. As well, neither the original contribution nor the investment gains will be taxable when the funds are withdrawn from the TFSA, and amounts withdrawn will not be included in income when determining the taxpayer’s eligibility for means-tested federal benefits and tax credits, like Old Age Security, the GST/HST credit, or the age credit.
Planning for TFSA withdrawals and contributions
Each Canadian aged 18 and over can make an annual contribution to a Tax-Free Savings Account (TFSA) – the maximum contribution for 2025 and for 2026 is $7,000. As well, where an amount previously contributed to a TFSA is withdrawn from the plan, that withdrawn amount can be re-contributed, but not until the year following the year of withdrawal.
Consequently, it makes sense, where a TFSA withdrawal is planned (or the need to make such a withdrawal might arise) within the next few months, to make that withdrawal before the end of the calendar year. A taxpayer who withdraws funds from their TFSA on or before December 31, 2025 will have the amount which is withdrawn added to their TFSA contribution limit for 2026, which means it can be re-contributed, where finances allow, as early as January 1, 2026. If the same taxpayer waits until January of 2026 to make the withdrawal, they won’t be eligible to recontribute the funds withdrawn until 2027.
The approach of the calendar year end doesn’t usually prompt Canadians to consider the details of making contributions to an RRSP, or contributions to or withdrawals from a TFSA or RRIF. There is, however, no flexibility in the deadlines for taking such actions, and considering what steps may be needed or advisable now means one less thing to remember as the December 31 deadline nears.