December 31, 2025 marks not just the end of the calendar year, but the end of the 2025 tax year for every individual Canadian taxpayer. Most Canadians are thinking about anything but income taxes during the holiday season, but the reality is that December 31 is often a critical date when it comes to determining how much tax one will pay for 2025. In some cases, steps need to be taken by December 31 in order to obtain administrative relief from interest or penalty charges which have been imposed by the Canada Revenue Agency. In other cases, not taking certain actions prior to the end of the calendar year will mean losing out on deductions and credits which might otherwise have been claimed on the return for 2025, and which would have reduced tax payable for the year. And a failure to meet that December 31 deadline cannot be remedied: in almost all cases, only actions taken prior to the end of the year can lower 2025 taxes payable.
While there isn’t much time left in 2025 to implement the available tax saving strategies, the good news is that the most readily available of those strategies don’t involve a lot of planning or complicated financial structures – in many cases, it’s just a question of considering the timing of steps which would have been taken in any event. What follows is a listing of some of the steps which should be considered by most Canadian taxpayers as the calendar and tax year-end approaches.
Taxpayer requests for penalty or interest relief – December 31, 2025 deadline
Taxpayers are entitled to request relief from interest or penalty charges which have been imposed by the Canada Revenue Agency. In order for such relief to be provided, requests must be sent to the Agency within 10 years from the end of the calendar year or fiscal period concerned, as the Minister of National Revenue has no authority to provide relief when the request is for a tax year or fiscal period that ended more than 10 years before the calendar year in which the request is made.
The December 31, 2025 deadline therefore applies to taxpayer relief requests for:
- the 2015 tax year;
- any reporting period that ended during the 2015 calendar year; and
- any interest and penalties that accrued during 2015 for any tax year or reporting period.
While such requests can be made using the form issued by the CRA and sent by mail or courier, they can also be made online, using the Agency’s My Account service. As the Minister does not have the authority to accept late-filed requests, an online application is likely preferable where the application deadline is imminent. Details of the relief program and information on how to apply for penalty or interest relief can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/complaints-disputes/cancel-waive-penalties-interest.html.
Making a final RRSP contribution
Most Canadians are aware that an RRSP contribution can be made anytime up to 60 days after the end of the calendar/tax year and claimed as a deduction on the return for that calendar/tax year. There is, however, an important exception to that rule, of which most Canadians are likely unaware.
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 a registered retirement income fund (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 contributions after December 31 is not available. Any RRSP contribution to be made by a person who turns 71 during 2025 must be made by December 31, 2025. Once that deadline has passed, no further RRSP contributions are possible.
Medical expenses
The federal and all provincial and territorial governments provide a non-refundable tax credit for eligible medical expenses incurred. Most Canadians will incur such expenses; while we benefit from a publicly-funded health care system, there is nonetheless a long list of medical and para-medical expenses which must be paid for out-of-pocket.
Individual taxpayers are entitled to claim the medical expense tax credit for all qualifying medical expenses incurred during any 12-month period which ends during the taxation year. In other words, the taxpayer can choose the 12-month period for which medical expenses incurred create the highest tax credit amount. However, as with other such credits, any expense, in order to be claimed on the 2025 tax return, must be incurred before the end of 2025.
There is an additional requirement for claims for the medical expense tax credit: only medical expenses which exceed the lesser of $2,834 or 3% of the taxpayer’s net income for the year can be claimed. For 2025, that means that any taxpayer whose net income for the year is less than $94,467 will be entitled to claim medical expenses that are greater than 3% of their net income for the year. Those having net income of $94,467 or greater will be limited to claiming qualifying expenses which exceed the $2,834 threshold. Finally, it’s possible to combine medical expenses incurred by both spouses and by their minor children, and to and make that combined claim on a single return. In most cases, a better tax result can be obtained where that claim is made on the return of the lower-income spouse.
It is unfortunate, given the number of Canadians who are in a position to claim the medical expense tax credit, that the computation of that credit can be confusing. The CRA does provide detailed information on its website about the medical expense tax credit, and that information can be found at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4065.html. While the material provided on that webpage refers to the 2024 tax year, the same rules will apply for 2025, with the exception of the 2025 medical expense tax credit/net income threshold amount described above.
Charitable donations
The federal government and each of the provincial and territorial governments provide a tax credit for donations made to registered charities during the year. In all cases, in order to claim a credit for a donation in a particular tax year, that donation must be made by the end of that calendar year.
There is, however, another reason to ensure that planned donations are made by December 31. The credit provided by each of the federal, provincial, and territorial governments is a two-level credit, in which the percentage of the credit claimable increases with the amount of donation made. For federal tax purposes, the first $200 in donations is eligible for a non-refundable tax credit equal (for 2025) to 14.5% of the donation. The credit for donations made during the year which exceed the $200 threshold is, however, calculated as 29% of the excess. For the minority of taxpayers who have taxable income (for 2025) over $253,414, charitable donations above the $200 threshold can receive a federal tax credit of 33%.
As a result of the two-level credit structure, the best tax result is obtained when donations made during a single calendar year are maximized. For instance, a qualifying charitable donation of $400 made in December 2025 will receive a federal credit of $87.00 ($200 times 14.5% plus $200 times 29%). If the same amount is donated, but the donation is split equally between December 2025 and January 2026, the total credit claimable is only $58.00 ($200 times 14.5% plus $200 times 14.5%), and the 2026 donation can’t be claimed until the tax return for 2026 is filed in April 2027. And, of course, the larger the donation in any one calendar year, the greater the proportion of that donation which will receive credit at the 29% level rather than the 14.5% level.
It’s also possible to carry forward, for up to five years, donations which were made in a particular tax year. So, if donations made in 2025 don’t reach the $200 level, it’s usually worth holding off on claiming the donation and carrying it forward to the next year in which total donations, including carryforwards, are over that threshold. Of course, this also means that donations made but not claimed in any of the 2020, 2021, 2022, 2023, or 2024 tax years can be carried forward and added to the total donations made in 2025, and the aggregate amount then claimed on the 2025 tax return.
Generally – and especially in Ontario, which is the only province or territory which imposes a high-income surtax – it makes sense for the higher-income spouse to make the claim for the total of charitable donations made by both spouses. Doing so will reduce the overall tax payable by that spouse and will thereby minimize (or avoid) liability for the Ontario high-income surtax.
Reviewing tax instalments for 2025
Millions of Canadian taxpayers (particularly the self-employed and retired Canadians) pay income taxes by quarterly instalments, with the amount of those instalments representing an estimate of the taxpayer’s total liability for the year.
The final quarterly instalment for this year will be due on Monday, December 15, 2025. By mid-December, most Canadians have a reasonably accurate idea of what their income and deductions will be for 2025 and so will be in a position to estimate what the final tax bill for the year will be, taking into account any tax planning strategies already put in place, as well as any RRSP contributions which will be made. While the tax return forms to be used for the 2025 year haven’t yet been released by the Canada Revenue Agency, it’s possible to arrive at an estimate by using the 2024 T1 form or tax return preparation software for the 2024 tax year. Increases in tax credit amounts and tax brackets from 2024 to 2025 (as well as the federal tax rate reduction which took effect on July 1, 2025) will mean that using the 2024 software will likely result in a slight over-estimate of tax liability for 2025. A listing of such tax preparation software programs which can be downloaded from the CRA website (free of charge or at a nominal cost) is available at https://www.canada.ca/en/services/taxes/income-tax/personal-income-tax/how-file/tax-software/find-software.html.
Once an estimate of one’s tax bill for 2025 has been arrived at, that amount should be compared to the total of tax instalments already made during 2025 (that information is available by checking one’s online tax account on the Canada Revenue Agency website, or by calling the CRA’s Individual Income Tax Enquiries line at 1-800-959-8281). Depending on the result, it may then be possible to reduce the amount of the tax instalment to be paid on December 15 – and thereby free up some additional funds for the inevitable holiday (over)spending!