Early 2026 Tax Tips
As the end of the year approaches, many individuals focus on tax planning to help minimize their income tax liability. However, some important tax-planning opportunities arise early in the new year and are often overlooked. This article highlights several strategies with early 2026 deadlines that may be worth considering.
Any reference to a spouse also includes a common-law partner.
2025 RRSP Contribution Deadline
The deadline to make a registered retirement savings plan (RRSP) contribution that can be claimed as a deduction on your 2025 tax return is March 2, 2026. Although the deadline to make RRSP contributions deductible for the 2025 tax year has passed, individuals can still plan ahead by making contributions for the 2026 tax year. Contributing earlier in the year allows investments more time to benefit from tax-deferred growth.
If you don’t have sufficient cash, you may consider making an in-kind contribution of eligible securities from a non-registered account to your RRSP or a spousal RRSP. Contributing securities with accrued gains will trigger a capital gain. However, if the securities are in a loss position, you may not want to contribute the securities in-kind, as your ability to claim that loss will be denied.
Another option may be borrowing funds to make an RRSP contribution. Keep in mind that borrowing to invest involves additional risk. You are required to repay the loan and interest regardless of investment performance, and interest paid on funds borrowed to contribute to an RRSP is not tax-deductible.
Tax-Free Savings Account (TFSA)
Making a TFSA contribution early in 2026 can help maximize tax-free growth. The annual TFSA contribution limit for 2024, 2025, and 2026 is $7,000.
If you’ve been eligible to open a TFSA since 2009 and have never contributed, your total contribution room as of Jan. 1, 2026, would be $109,000. Unused contribution room carries forward indefinitely. In addition, TFSA withdrawals made in 2025 (excluding excess contribution withdrawals) can be re-contributed starting Jan. 1, 2026.
Care should be taken when calculating TFSA room, as the CRA may impose penalties for over-contributions. If cash is limited, you may consider an in-kind contribution of eligible securities from a non-registered account. As with RRSPs, capital losses on contributed securities are denied, while capital gains are realized in the year of contribution.
Mutual fund purchases
When you purchase a mutual fund partway through the year, the purchase price includes any accumulated income and gains that have not yet been distributed. When the fund makes a distribution, the distribution includes these accumulated earnings and is fully taxable even though you purchased the accumulated earnings with your after-tax dollars. One way to avoid receiving this distribution is to purchase the fund after the distribution date. If you delayed purchasing mutual funds last year to avoid the year-end distributions, consider purchasing mutual funds early in the new year. Review your portfolio with your RBC advisor to determine if the mutual fund purchase makes sense for you.
Conclusion
Early-year tax planning can present valuable opportunities. Speak with a qualified tax advisor to determine whether these strategies are appropriate for your personal situation.
Disclaimer: This article may contain strategies, not all of which will apply to your particular financial circumstances. The information in this article is not intended to provide legal, tax or insurance advice. To ensure that your own circumstances have been properly considered and that action is taken based on the latest information available, you should obtain professional advice from a qualified tax, legal and/or insurance advisor before acting on any of the information in this article
RBC Dominion Securities Parisien Millar Wealth
Crystal Millar, CFP | 613 930-2514 | Crystal.millar@rbc.com
Jo Ann Parisien, CFP | 613 930-2591 | Joann.parisien@rbc.com
www.ca.rbcwealthmangement.com/web/parisien.millar
