2025 Year-End Tax Planning Guide

Introduction

Welcome to our 2025 tax planning issue, full of topics and opportunities that you may consider as we reach the end of the year and look forward to 2026.

A reminder that this publication is not intended to be a summary of the technical provisions of the Income Tax Act. Before undertaking any tax planning strategy, reviewing it thoroughly with your trusted Crowe MacKay tax advisor is important.

Missed Opportunities Mean Extra Taxes

Thousands of Canadians pay more income tax than they should. Not taking full advantage of tax credits and deductions may make you one of those generous Canadians without even knowing it. Are you aware of all of the deductions that are available to you? Do you file your return on time? Do you pay quarterly tax instalments to avoid interest charges? Here is a look at some of the commonly missed opportunities that could be contributing to your larger than necessary tax bill.

Expenses You May Be Entitled to Deduct

Employment Expenses – Auto and Home Office

Carrying Charges and Deductible Interest

Borrowed funds must generally be used to earn income (e.g. investing) for the related interest to be deductible. Maintaining proper documentation of loans and interest payments will help support claims for interest deductions. Deductible carrying charges may include investment counsel, bank, or similar fees.

We note that recently the Canada Revenue Agency (CRA) has been reviewing carrying charges and interest deductions on many T3 trust returns, and sending out educational letters to inform taxpayers which expenses would be deductible.

Childcare Expenses

Subject to certain limitations, childcare expenses may be deducted from income by the lower-income spouse. These expenses include daycare, babysitting, boarding school, and day camps. Note that you must obtain the Social Insurance Number of any individual you paid for childcare and supporting documentation is frequently requested by the Canada Revenue Agency.

Moving Expenses

If you moved during the year to be at least 40 kilometres closer to a new job, to run a business, or to attend a post-secondary educational institution full-time, you may be able to deduct certain moving expenses. The amount you can deduct is limited to the amount you earn at the new location in the year. Unused deductions can be carried forward and deducted against the related income in a subsequent year.

Some examples of allowable moving expenses are:

• accommodation, meals, and temporary living expenses near your new or old residence,
• cost of changing your address on legal documents,
• cost of replacing your driver's license,
• cost of cancelling the lease for your old residence or expenses for selling your old residence, such as real estate commissions and advertising,
• cost to maintain your old residence when vacant (maximum of $5,000),
• certain expenses related to purchasing your new residence,
• transportation and storage for household effects,
• travelling from your old residence to your new residence, and
• utility hook-ups, disconnections, and other related costs.

Proper documentation of your expenses, including receipts, is critical as the Canada Revenue Agency generally requests proof of moving costs.

Tax Credits You Might Be Eligible to Claim

Charitable Donations

Charitable donations made by you or your spouse during the year should normally be added together and claimed on the income tax return of one spouse. A higher credit is available when total donations exceed $200, so combining the donations and claiming them on one return makes more sense. If your total contributions are less than $200, there is no advantage to claiming them on one return. The key to supporting your claim is to keep the official tax receipts.

If you donate certain publicly listed securities, your donation credit is based on the fair market value of those securities. Furthermore, you will generally not pay tax on capital gains on the donated securities, subject to the Alternative Minimum Tax rules, discussed further below.

Donations can be carried forward for up to five years. If you find a donation receipt that was not previously claimed, bring it in to review with your Crowe MacKay tax advisor.

Medical Expenses

You may claim a non-refundable tax credit on medical expenses for yourself, your spouse, and dependent children. While either spouse can make a claim, medical expenses should usually be added together and claimed on the income tax return of one spouse (usually the lower-income spouse) to maximize tax savings.

You are not restricted to claiming on a calendar year basis, as you can claim medical expenses for any 12-month period that ends in the year. Commonly missed expenses include:

• dental,
• eyeglasses,
• private medical insurance (including certain travel medical insurance premiums), and
• certain travel costs, such as travel to regional or provincial centres for treatment.

You may also claim certain expenses in respect of an animal specifically trained to perform tasks to assist with post-traumatic stress disorder.

Medical cannabis can be claimed as a medical expense. However, individuals can only claim purchases from specific registered sellers. Purchases from other retailers may not be eligible.

Attendant Care & Nursing Home Expenses

For persons who qualify for the disability amount, attendant care expenses may be claimed for:

• part-time or full-time attendant care in a self-contained domestic establishment (the person's home, for instance),
• full-time attendant care in a nursing home, and
• attendant care in retirement homes, homes for seniors, or other institutions.

Attendant care expenses can be claimed as medical expenses to a maximum of $10,000 per year if the disability tax credit is claimed. However, there is no maximum amount if the disability tax credit is not claimed.

When the expenses are for full-time care in a nursing home there is no limit on the total attendant care expense that can be claimed as medical expenses, however, the disability tax credit cannot be claimed. It is recommended you get a detailed fee statement from long term care facilities to ensure appropriate expenses are claimed.

Disability Tax Credit

This credit is available to a person with a severe and prolonged impairment in physical or mental function subject to certain criteria. To qualify, the Canada Revenue Agency must approve an application signed by your doctor or nurse practitioner. Areas that may apply include:

• vision/blindness,
• life-sustaining therapy,
• impairment to physical functions such as walking, speech, hearing, and feeding, and
• impairment to performing the mental functions necessary for everyday life.

Recent changes to eligibility requirements should make the credit more accessible to those with an impairment to perform the mental functions necessary for everyday life. There has also been a reduction in the eligibility requirements for individuals undergoing life-sustaining therapies, reducing the frequency of treatment to two times each week; however, an individual must still receive therapy for a duration averaging not less than 14 hours a week. These recent changes have been enacted with a retroactive date and apply to Disability Tax Credit (DTC) certificates filed on or after January 1, 2021.

The DTC can be claimed retroactively for up to 10 years. A T1 adjustment can be filed to claim the credit for any tax years that have lapsed since the impairment began, as certified by your doctor. Once a person with a disability has applied for and is deemed eligible for the disability tax credit, they may also be eligible to participate in a Registered Disability Savings Plan, which is discussed later in this newsletter.

Other credits may be available to those supporting certain family members who are dependent on them due to a physical or mental infirmity:

• amount for infirm dependents age 18 or older,
• attendant care and nursing home expenses, and
• Canada caregiver amount.

Teacher & Early Childhood Educator School Supply Tax Credit

The Teacher and Early Childhood Educator School Supply tax credit is a refundable tax credit.

This credit allows an employee who is a teacher or early childhood educator and holds a recognized certificate or licence to claim a 25% refundable tax credit on up to $1,000 of purchases of eligible teaching supplies during the year.

Student Loan Interest

Interest paid on student loans obtained under the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Apprenticeship Loans Act, or similar provincial or territorial government legislation for post-secondary education can be claimed as a tax credit. If you do not use the credit for the year the interest is paid, the unused amount can be carried forward for up to five years.

Home Buyers' Tax Credit

If you are a first-time home buyer, you may be eligible to claim a 15% non-refundable tax credit on up to $10,000. You may be considered a first-time home buyer if neither you nor your spouse or common-law partner owned and lived in another home (inside or outside Canada) in the calendar year of the purchase or any of the four preceding calendar years.

Top-Up Tax Credit

The top-up tax credit will effectively maintain its current 15% tax rate for non-refundable tax credits in rare circumstances where the credits exceed the first federal income tax bracket threshold rate (rather than the 14.5% rate for 2025 and 14% rate for 2026 and subsequent years). The top-up tax credit applies for the 2025 to 2030 taxation years and is intended to ensure individuals don't have a higher tax liability due to the middleclass tax cut.

Home Accessibility Tax Credit

The Home Accessibility Tax Credit (HATC) is available for seniors (age 65 and older) and individuals who qualify for the disability tax credit. This credit allows these individuals to claim a 15% non-refundable tax credit on up to $20,000 of expenses incurred to perform a "qualifying renovation" on their home. The renovation must allow the individual to gain access to, or be mobile or functional within the home, or reduce the risk of harm to the individual within or in gaining access to the home. British Columbia has a similar home renovation tax credit which is a 10% refundable tax credit on up to $10,000 of qualifying expenses. Such expenses may also be eligible for the medical expense tax credit, providing a double tax benefit from claiming these expenses.

For the 2026 and subsequent taxation years, expenses claimed under the medical expense tax credit will no longer be eligible for the home accessibility tax credit.

Digital News Subscription Tax Credit

For prior years, individuals could claim a 15% non-refundable tax credit on amounts up to $500 spent on a digital news subscription with a qualified Canadian journalism organization. This tax credit has now been rescinded and ended in 2024.

Canada Training Credit

This refundable tax credit aims to help workers between the ages of 25 and 64 and encourages them to pursue professional development. Individuals can accumulate $250 of credit room per year, up to a lifetime maximum of $5,000. The amount that an individual can claim as a credit in a particular tax year is equal to the lesser of 50% of eligible tuition and fees paid in a year and the accumulated room at the beginning of the year.

Clean Buildings Tax Credit

The clean buildings tax credit is a refundable income tax credit for qualifying retrofits that improve the energy efficiency of eligible commercial and multi-unit residential buildings with four or more units in British Columbia. The credit is equal to 5% of the qualifying expenditures paid before March 31, 2026.

To view the full pdf, click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.