Year-End Planning: What Should You Review Before December 31?

As December 31 approaches, some planning opportunities become more time-sensitive. Tax may start the conversation, some of the most important year-end decisions extend beyond simply reducing this year’s tax bill.

Make the Most of Your FHSA

If you’re eligible to open a First Home Savings Account, it’s worth reviewing before year end. The FHSA combines a tax deduction for contributions and for qualifying withdrawals, tax-free growth, making it one of the most attractive planning tools available to first-time home buyers.

Unlike an RRSP, there is no first-60-days window for an FHSA contribution. If you want the contribution to count for this calendar year, it must be made by December 31.

You also don’t have to open and fund the account at the same time. Opening an FHSA before December 31 allows contribution room to begin accumulating, even if deposits won’t occur until next year.

Review Your RESP Strategy

If you have children or grandchildren, year end is a good time to look at both sides of the RESP: what is going in and, if post-secondary education has started, what should be coming out.

During accumulation years, confirm whether contributions are on track to capture the maximum available Canada Education Savings Grants. If grants were missed in earlier years, catch-up contributions may help you recover some of that unused entitlement and provide additional time for compounding growth.

Once your child is in post-secondary school, withdrawal planning becomes the main focus. Educational Assistance Payments include grants and investment growth and are taxable to the student. Since many students have little other income, thoughtful withdrawal timing can help cover tuition, housing, and living costs without creating unnecessary tax.

It’s also a good time to revisit how the RESP is invested. An investment approach that made sense when university was ten years away may no longer be suitable when the money is needed next year.

Look at Capital Gains and Losses Together

Your investment portfolio may also create year-end planning opportunities. Start by looking at realized gains and losses, then consider whether any planned transactions should happen before or after December 31.

If an investment has grown significantly, realizing a gain may make sense when it supports your broader plan. If another investment has fallen in value, realizing that loss may offset gains from this year, be carried back against gains from the previous three years, or be saved for a future year.

That said, tax should not drive the investment decision. Selling a strong long-term holding simply to create a loss can do more harm than good.

Be Intentional About Charitable Giving

If charitable giving is already part of your plan, don’t wait until the final days of December to think about how you will give.

How you donate can matter as much as the amount you donate. For example, gifting publicly traded securities directly to a qualified charity may be more tax-efficient than selling the investment first and donating the cash.

If giving is an ongoing priority, you may also want to consider a donor-advised fund or a planned multi-year strategy. These options can bring more structure to your giving and help you make decisions before a year-end rush.

Start with the causes and organizations that matter to you. The tax benefits are valuable, but they should support your generosity, not define it.

Revisit How You Pay Yourself

If you own an incorporated practice, your compensation plan deserves more than a quick decision at year end.

Salary, dividends, or a combination may all be appropriate. The right mix depends on your:

• personal cash flow needs
• RRSP savings goals
• corporate cash position
• other taxable income
• retirement plans

You may also need to decide whether to declare a bonus or dividend before year end. These choices can affect corporate and personal tax, RRSP contribution room, CPP participation, and overall retirement income planning.

The best answer is rarely based on one tax year alone. A good compensation strategy considers what you need now and what you’re building toward.

Plan for Upcoming Cash Needs

One area that is frequently overlooked is timing future cash needs.

Significant expenditures in early 2027, such as practice investments, real estate purchases, debt repayment, or retirement transitions, may benefit from reviewing when investment withdrawals occur.

Timing matters. A withdrawal made in December can have a different tax result than one made in January. If TFSA funds are part of the plan, remember that an amount withdrawn this year is added back to your contribution room on January 1 of the following year.

Planning ahead can help you protect flexibility and avoid an unnecessary tax surprise.

Bringing It All Together

Year-end planning is not a race to find deductions before the clock runs out. It’s a chance to make deliberate decisions while you still have time to act.

Your FHSA, RESP, investments, charitable giving, compensation, and cash needs all connect to the bigger picture. Reviewing them together helps you avoid isolated decisions that look good today but work against your longer-term objectives.

The goal is simple: know what needs attention, make the decisions that matter, and head into the new year with greater clarity, confidence, and control.

Have questions about what should be on your year-end list? We’re here to help.

Roxanne Arnal is a Certified Financial Planner®, Chartered Life Underwriter®, Certified Health Insurance Specialist, former optometrist, professional corporation president, and practice owner. She is dedicated to empowering individuals and their wealth by helping them make smart financial decisions that bring more joy to their lives.

This article is for information purposes only and is not a substitute for personalized financial planning. Errors and omissions excepted.