7 year-end tax credits and strategies to maximize before December 31st
Congratulations, you’ve made it halfway through another school year.
Now it’s time to relax, recharge, indulge in a bit of holiday fare—oh, and get your tax strategies in order.
While it might seem a little early to be thinking about filing your return, there are certain time-sensitive tax tasks that are specifically tied to the end of the current calendar year.
With December 31 fast approaching, let’s jump right into it with two educator-specific tax items.
1: Eligible Educator School Supply Tax Credit
Ontario teachers and early childhood educators can claim a 15% refundable tax credit on up to $1,000 of eligible school supplies purchased within the calendar year. With the school year running from September to June, it’s important to remember that distinction, since qualifying purchases will count from the last half of the previous school year (January to June) and first half of the current school year (September to December). This could be especially important if you’ve moved between schools—so, be sure to keep all receipts for any eligible supplies purchased.
Also note that the Canada Revenue Agency (CRA) may ask you to provide written certification from your school administrator/board to verify the following:
- Supplies were purchased solely by you (and you were not provided an allowance for them)
- They were used strictly for the purpose of teaching/facilitating student learning
- You were not reimbursed for any of the claimed expenses
To ensure seamless certification from your school/board, it’s a good idea to get their approval prior to making any purchases.
Maximum benefit you can expect to receive: $150
2: Tax deduction for an approved leave
If you made personal cash payments to the Ontario Teachers’ Pension Plan (OTPP) for an approved leave of absence during 2025, you are eligible for a tax deduction to potentially reduce your taxable income. Just be sure to make any outstanding payments before December 31 in order to be applied to the tax receipt that you’ll receive in February 2026.
Have investments? Be sure to leverage the following tax-planning strategies before December 31.
3: Tax-loss selling of low-performing investments
If you have realized capital gains this year, you might consider “tax-loss selling”, also known as tax-loss harvesting, to reduce your overall tax bill. This strategy involves selling investments in your non-registered accounts that have decreased in value to realize a capital loss.
Why does tax-loss selling only apply to non-registered accounts? This is due to the fact gains and losses within registered accounts (e.g., RRSPs, TFSAs, RESPs, etc.) are typically not taxed or deductible. So, any attempt to employ the tax-loss strategy to these types of accounts will simply result in the loss being denied.
Keep in mind that with a T+1 settlement period for most securities (meaning the settlement occurs one business day after the trade date), the last day to employ this strategy is December 30 (versus Dec. 31), as all capital losses must be claimed in the current tax year in order to be eligible. With that said, unused losses can be carried back by up to 3 years or forward indefinitely.
Tax-loss selling might not be fit for everyone. Because this strategy involves selling assets that have declined in value, it could impact your long-term investment goals or result in unintended portfolio shifts. We strongly recommend seeking advice from a financial advisor on the pros and cons before undertaking this strategy to ensure it aligns with your unique financial situation.
4: Deferring capital gains on high-performing investments
This strategy is worth considering if you know that you’ll be in a lower tax bracket the following year (such as going from earning ‘working’ income to collecting pension income). Deferring capital gains can also be aligned with other tax-planning strategies (such as capital losses) to minimize tax liability.
Looking for a way to avoid the capital gains tax entirely?
Donating qualifying publicly traded securities to a registered charity enables you to avoid the capital gains on the appreciated value and receive a charitable tax credit in the process. Donations must be made by December 31 in order to qualify.
5: Reducing taxable income by maximizing First Home Savings Account contributions
In addition to being a great way to save for your first home, the FHSA also provides you with a double tax advantage. That’s because just like the RRSP, contributions are tax-deductible and just like the TFSA, withdrawals are tax-free. With an FHSA, contributions and withdrawals must qualify for first-home purchase purposes. So, you’ll definitely want to get those FHSA contributions in by December 31 in order to maximize your claim when filing this year’s return next April.
In addition to FHSA contributions, you may also be eligible for other deductible expenses and tax credits.
6: Capture all eligible deductions and credits
To maximize your tax efficiency before December 31, ensure you are accounting for both deductible expenses and non-refundable tax credits.
Deductible expenses: Deductions are subtracted from your gross income, reducing the amount of income you are taxed on. Some common tax deductions include:
- Investment management fees: These apply to specific services related to managing or administering your investments held in non-registered accounts.
- Carrying charges and interest expenses: Interest on money borrowed to earn investment income (in a non-registered account) is usually deductible.
- Moving expenses: To qualify, you must have moved at least 40 kilometres closer to a new home for a new job or to attend full-time post-secondary education.
Non-refundable tax credits: These tax credits are applied against the tax you owe. While they can reduce your tax bill to zero, they will not result in a cash refund for any excess amount. Examples include:
- Medical expenses: This includes eligible, unreimbursed medical and dental costs, such as prescriptions, dental services and private health insurance premiums.
- Interest paid on student loans: In order to qualify, loans must be government-issued (i.e. Canada Student Loan, Ontario Student Assistance Program, etc.); private loans from banks or financial institutions do not qualify for this tax credit, regardless of whether they were used for educational purposes.
- Charitable donations: Donations must be made to a registered charity by December 31 to be claimed on this year’s return.
Refundable vs. non-refundable tax credits:
Non-refundable tax credits can reduce the amount of tax you owe, but that is all. Only refundable tax credits can generate a dollar amount that is paid out as a cash refund (on any excess tax paid).
Identifying all eligible claims can be complex as tax laws often change. For a comprehensive and up-to-date list of all available deductions, credits, and expenses, please refer to the official CRA website.
Do you find yourself regularly having large, predictable deductions/credits every year?
7: Consider reducing tax at source
If significant deductions or credits are expected, you can apply directly to the CRA to reduce tax withheld from your pay (and help to improve overall cash flow) throughout the year.
Reducing tax at source may be particularly beneficial in situations where you’re regularly:
- Making deductible support payments to a former spouse
- Paying interest on money borrowed for investment purposes
- Making significant RRSP contributions (through regular pre-authorized or lump sum contributions)
- Contributing large financial donations to registered charities
- Paying deductible child care expenses throughout the year
Before applying to reduce your tax at source, it is highly recommended to consult with a qualified tax professional to ensure this strategy aligns with your specific financial situation.
Looking for ways to improve cash flow in the new year? Here are 5 tips for saving up to $500 a month.
Do you have financial resolutions for 2026 and beyond? We can help make them come true.
Whether you’ve got dreams of taking a deferred salary leave to travel the world—or are just wanting to find ways to better maximize cash flow to meet your everyday needs, call on Educators Financial Group. Whatever your goals and wherever you are on the pay grid, we can help you come up with a plan that works with your budget. Retired? Chat with us for advice on how to avoid (and fill) a pension income gap.
The end of the year is almost here—put your plan together right now
Sources:
https://www.otpp.com/en-ca/members/planning-tools-and-resources/faqs/working-member/#op-collapse-taxDeductible
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/deductions-credits-expenses.html
