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Many Canadians have a basic knowledge of the deadlines which apply to contributions to and withdrawals from tax-deferred savings plans. For instance, most Canadians are aware that the deadline for making an RRSP contribution is March 1 of the calendar year but that contributions to one’s tax-free savings account (TFSA) can be made at any time during the tax year. As well, most Canadians who have opened a registered retirement income fund (RRIF) are aware that they are required to withdraw a specified amount from that RRIF each year, with the percentage withdrawal amount based on the RRIF holder’s age – although few are aware of when and how that required withdrawal is calculated.

Many Canadians have a basic knowledge of the deadlines which apply to contributions to and withdrawals from tax-deferred savings plans. For instance, most Canadians are aware that the deadline for making an RRSP contribution is March 1 of the calendar year but that contributions to one’s tax-free savings account (TFSA) can be made at any time during the tax year. As well, most Canadians who have opened a registered retirement income fund (RRIF) are aware that they are required to withdraw a specified amount from that RRIF each year, with the percentage withdrawal amount based on the RRIF holder’s age – although few are aware of when and how that required withdrawal is calculated. 

Consequently, as the end of the calendar (and tax) year approaches, most Canadians aren’t really focused on the significance of that date when it comes to making either a contribution to (or a withdrawal from) any of their tax-deferred savings plans, whether an RRSP, RRIF, or TFSA.

That lack of awareness can be costly, as there are some instances in which December 31 is an absolute deadline for taking required steps with respect to one’s tax-deferred savings plans, and many more instances in which significant tax advantages can be obtained by acting before the end of the calendar year. What follows is an outline of steps which should (or in some cases must) be considered and implemented before the end of the 2026 calendar year, by Canadians who have an RRSP, a RRIF, or a TFSA – or maybe all three.

Timing of RRSP contributions

When you are making a spousal RRSP contribution

Under Canadian tax rules, a taxpayer can make a contribution to an RRSP in their spouse’s name and claim the deduction for the contribution on their own return. When the funds are withdrawn by the spouse, the amounts are taxed as the spouse’s income, at a (presumably) lower tax rate. However, the benefit of having withdrawals taxed in the hands of the spouse is available only where the withdrawal takes place no sooner than the end of the second calendar year following the year in which the contribution is made. Therefore, where a contribution to a spousal RRSP is made in December of 2026, the contributor can claim a deduction for that contribution on their return for 2026. The spouse can then withdraw that amount as early as January 1, 2029 and have it taxed in their own hands. If the contribution isn’t made until January or February of 2027, the contributor can still claim a deduction for it on the 2026 tax return, but the amount won’t be eligible to be taxed in the spouse’s hands on withdrawal until January 1, 2030. This is an especially important consideration for couples who are approaching retirement and may plan on withdrawing funds in the relatively near future. Even where that’s not the situation, making the contribution before the end of the calendar year will ensure maximum flexibility in the event that an unforeseen need to withdraw funds should arise.

If you turn 71 during 2026

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 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 making contributions after December 31 is not available. Any RRSP contribution to be made by a person who turns 71 during the year must be made by December 31 of that year. Once that deadline has passed, no further RRSP contributions are possible.

RRIF withdrawals for 2026

Under Canadian law, anyone who has a RRIF is required to make a minimum withdrawal from that RRIF each year. The amount of the withdrawal is calculated as a specified percentage of the fair market value of the property held in the RRIF at the beginning of the calendar year, with that percentage based on the age of the RRIF holder at that time.

Taxpayers who have no immediate need of funds held within a RRIF are often reluctant to make a withdrawal and pay the tax on those amounts, especially where the value of investments held in a RRIF have declined. While there is no way of avoiding the requirement to withdraw that minimum amount from one’s RRIF, and to pay tax on the amount withdrawn, such taxpayers can consider contributing those amounts to a TFSA, to the extent of their available TFSA contribution room. Where that is done, the funds can be re-invested and continue to grow. As well, neither the original contribution nor the investment gains earned will be taxable when the funds are withdrawn from the TFSA and, unlike amounts withdrawn from a RRIF, TFSA withdrawals will not be included in income when determining the taxpayer’s eligibility for means-tested federal benefits and tax credits, like Old Age Security benefits, the Groceries and Essentials Benefit, or the age credit.

Pension income splitting on additional income

Pension income splitting is one of the most valuable tax saving strategies available to married couples. Essentially, pension income splitting allows a higher-income spouse (whose tax rate is likely to be greater) to notionally transfer up to half of their eligible pension income to the lower-income spouse, in whose hands the income will be taxed at a lower rate. No actual transfer of funds is required – the “transfer” is effected for tax purposes simply by having each spouse enter the relevant information on their tax returns for the year.

Only private pension income is eligible for pension income splitting – public retirement program benefits like Canada Pension Plan and Old Age Security do not qualify.  Income amounts that do qualify include withdrawals from an RRSP or RRIF, or private pension income.

In order for income to qualify for pension income splitting on the 2026 return, it’s necessary both that such income qualify as eligible income and that such income be received by the transferring spouse during 2026.

Private pension income amounts and the minimum required withdrawal (MRW) from a RRIF (both of which are eligible for pension income splitting) are generally paid to an individual automatically over the course of the tax year. However, there may be situations in which the spouses would benefit from pension income splitting on amounts greater than those which they would usually receive during the tax year. For example, in a year where one spouse has a much lower income than usual, or in the year a spouse dies, it may be advantageous, from a tax perspective, to utilize pension income splitting on additional amounts. Although a transferring spouse can transfer only up to 50% of eligible pension income to their spouse, there is no dollar limit on the amount of such transfers.

In such cases, that additional pension income to be split could come from RRSP withdrawals or additional withdrawals (over and above the MRW) made from a RRIF. However, regardless of the source of the additional eligible pension income, any and all such amounts must be received by the transferring spouse on or before December 31, 2026 in order to qualify for pension income splitting on the 2026 return.

Planning for TFSA withdrawals and contributions

Each Canadian aged 18 and over can make an annual contribution to a TFSA – the maximum contribution for each of 2025 and 2026 is $7,000. The contribution limit for 2027 has not yet been announced.

Where an amount previously contributed to a TFSA is withdrawn from the plan, that withdrawn amount can be re-contributed, but not until the year following the year of withdrawal.

Consequently, it makes sense, where a TFSA withdrawal is planned (or the need to make such a withdrawal might arise) within the next few months, to make that withdrawal before the end of the calendar year. A taxpayer who withdraws funds from their TFSA on or before December 31, 2026 will have the amount which is withdrawn added to their TFSA contribution limit for 2027, which means it can be re-contributed, where finances allow, as early as January 1, 2027. If the same taxpayer waits until January of 2027 to make the withdrawal, they won’t be eligible to recontribute the funds withdrawn until 2028.

The approach of the calendar year end doesn’t usually prompt Canadians to consider the details of making contributions to an RRSP, or contributions to or withdrawals from a TFSA or RRIF. There is, however, no flexibility in the deadlines for taking such actions, and considering what steps may be needed or advisable now means one less thing to remember as the December 31 deadline nears.

One of the few “benefits” of the recent pandemic was the public health mandate that required Canadians, including employees, to work from home. Such arrangements relieved employees of the time and financial costs of commuting and, in many ways, contributed to an improved work/life balance.

One of the few “benefits” of the recent pandemic was the public health mandate that required Canadians, including employees, to work from home. Such arrangements relieved employees of the time and financial costs of commuting and, in many ways, contributed to an improved work/life balance.

As well as the intangible benefits, working from home enabled employees to claim a deduction for work-from-home costs on their tax return for the year. During the 2020, 2021, and 2022 tax years, in fact, employees who worked from home were able to deduct a specified flat-rate amount from income for tax purposes, with no requirement that they actually incur any work-related costs.

Over the past couple of years, however, employers in both the public and private sectors have gradually restricted, or ended, the work-from-home option for their employees. Many such employees will therefore be wondering whether, and to what extent, the ability to deduct work-related costs from income is still available to them now that they are back at the office full-time.

As is almost always the case with income taxes, there is no one-size fits-all answer. Unfortunately, however, the starting point of the analysis for all employees is the rule that no deduction can be claimed for employment expenses, except as specifically allowed under the Income Tax Act. (By way of comparison, all reasonable expenses incurred for the purpose of earning income from business are treated as deductible, unless specifically disallowed or restricted under the Income Tax Act.)

As well, there are no circumstances in which a deduction can be claimed by an employee for the cost of commuting back and forth to work, or the cost of parking at the employer’s office or the cost of an office wardrobe – such costs are and always have been treated as personal expenses of the employee. Within that framework, however, there are some instances in which our income tax rules provide for the deduction of work-related expenses by employees. Generally, such deductions are allowed where the employee must incur costs related to their employment, and no reimbursement for such costs is provided by the employer. The nature and extent of such deductions depend on how the employee is compensated and whether they work in a specialized industry/sector.

Most employees in Canada work for an annual salary or for an hourly wage. Some of the more common deductions which may be incurred and claimed by employees who are compensated in either of those ways are listed below.

Automobile and travel expenses

Where an employee is required to work in different locations, or away from their employer’s place of business, a deduction may be available to the employee for the following types of costs, where those costs are paid personally by the employee and no reimbursement or non-taxable allowance is provided by the employer with respect to such costs:

• costs of operating a motor vehicle (gas, oil, insurance, maintenance costs, leasing costs, etc.) 
• travel costs (including lodging and transportation (like plane or train fare) and a portion of food and beverage costs); and
• the cost of parking.

Supplies

Where an employee incurs costs for supplies to be used directly in their work and such costs are not reimbursed by the employer, the employee can claim a deduction for those costs. Such supplies would include a portion of the cost of a cell phone plan, where the cost is reasonable and the employee uses that cell phone for both personal and employment-related purposes. A deduction can be claimed, of course, only for the portion of costs paid for employment-related use of the phone.

Salaries or office rent

An employee can deduct a salary which they paid (or that was paid for the employee and included in that employee’s income) to a substitute or assistant (extra help). Where an employee must pay rent in order to earn employment income (or rent was paid for the employee and included in the employee’s income) a deduction for rent amounts paid may similarly be claimed.

Where an employee incurs costs for which a deduction may be claimed, it is of course necessary to maintain records to document both the kinds of expenses incurred and the amount of such expenses. Those records must include all of the following:

• A daily record of expenses, together with receipts and any cancelled cheques;
• Any ticket stubs for travel;
• Invoices;
• Any monthly credit card statements;
• A record of each motor vehicle used for employment. This record must show both the total kilometres driven and the kilometres driven for employment purposes in the year.

Receipts for the purchase of merchandise or services have to show the following:

• The date the purchase was made;
• The name and address of the seller or supplier;
• The employee’s name and address;
• A full description of the goods or services bought; and
• Information regarding the GST/HST paid on the expenses.

A minority of employees in Canada are compensated by way of commission and for those employees, a broader range of employment-related expenses may be deducted on the annual return. In addition to the expense deductions listed above, employees who are partly or fully compensated by commissions may also be able to claim a deduction for advertising and promotional expenses and for a portion of entertainment expenses paid for clients.

Finally, employees who work in specialized industries or positions may be eligible to claim additional or different deductions for costs related to their employment. In particular, specific rules are provided for employees in the transportation and forestry sectors, as well as for employed tradespeople, employed apprentice mechanics, and employed artists.

The rules which govern the types of expenses which can be deducted by employees (and the extent of the deductions which can be claimed) are extremely specific and detailed. Information on the rules governing the deduction of employment expenses for  employees in each of the above categories, including how such claims are made on the annual return, can be found on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-22900-other-employment-expenses.html#toc2.

For a number of reasons, individuals who live with a disability are among the lowest-income Canadians. Whether they are unable to work at all owing to their disability, or can only work part-time, or just have difficulty securing employment, disabled individuals often live with significant financial stress and insecurity.

For a number of reasons, individuals who live with a disability are among the lowest-income Canadians. Whether they are unable to work at all owing to their disability, or can only work part-time, or just have difficulty securing employment, disabled individuals often live with significant financial stress and insecurity.

That reality is doubly unfortunate in that individuals with disabilities must often incur additional expenses (like the cost of medical supplies or mobility, hearing, or vision aids) in order to be able to work at all, and often those expenses must be paid for on an out-of-pocket basis, without reimbursement.

Our tax system includes a number of measures intended to recognize this reality, and the most important of those measures is the disability tax credit, or DTC program.

It’s important to understand, at the outset, what the DTC program is and is not. Despite the name, the DTC is not a program in which an amount is paid directly to eligible Canadians: rather, the DTC operates as a non-refundable tax credit which enables eligible individuals to earn a set amount of income on a tax-free basis.

The starting point in our tax system is to treat all income as taxable. However, all Canadian residents can claim a basic personal amount, which (for 2026) eliminates federal income tax on about the first $16,500 of income each year. Individual Canadians who are eligible for the DTC are able to earn an additional $10,300 per year free of federal tax. Consequently, such individuals can earn roughly $27,000 each year tax-free. In addition, each province and territory offers a disability tax credit, in varying amounts, and individuals who qualify for the federal DTC are entitled to claim the provincial credit.

As noted, many disabled individuals cannot work at all or are restricted in the amount of work they can do, meaning that a tax credit which enables them to earn income on a tax-free basis can be of limited benefit. However, where an individual qualifies for the DTC but cannot utilize (or cannot fully utilize) that credit because of low income, unused credit amounts can be transferred to a supporting family member on whom the disabled individual depends for shelter, food, or clothing. Where there is more than one supporting family member, any available credit amount can be divided between or among them.

The term disability can describe an extremely wide range of physical and mental conditions which impede, to a greater or lesser degree, the ability of an individual to function on a day-to-day basis, and not all such conditions will enable an individual to qualify for the DTC. For instance, most provinces provide income support programs for those who cannot work by reason of disability, but qualifying for such support programs, in any province, does not mean that an individual will therefore be eligible for the DTC.

The federal government has developed detailed criteria which determine whether an individual does or does not qualify for the DTC and, while such rules are necessary, given the wide range of possible fact situations, they can unfortunately be confusing. Essentially, there are three prescribed categories, and in order to be eligible for the DTC an individual must qualify under at least one of those categories. Briefly, the categories are as follows:

• An individual has a marked restriction in any of the following areas which is present at least 90% of the time and is expected to last for a continuous period of at least 12 months.
  • Walking
  • Mental functions
  • Dressing
  • Feeding
  • Eliminating (bowel or bladder functions)
  • Hearing
  • Speaking
  • Vision
• An individual may not have a marked restriction with respect to any single one of the functions listed above, but lives with significant limitations relating to two or more of those functions. In such circumstances, the combined effect of those limitations may be considered equivalent to an overall “marked restriction”. In addition, such limitations must present at least 90% of the time and be expected to last for at least 12 continuous months.
• Individuals who are not living with either “marked restrictions” or “limitations” but who are required to undergo “life-sustaining therapy” at least twice a week for an average of at least 14 hours a week, with such requirement lasting or expected to last for at least 12 months, can also qualify for the DTC. Life sustaining therapy for purposes of DTC eligibility criteria could include insulin therapy, dialysis, oxygen therapy, or chest physiotherapy. 

In order to claim the DTC, an individual must have their application approved by the Canada Revenue Agency (CRA). In order to obtain that approval, the individual and their medical practitioner must complete a lengthy (16 pages) and very detailed application form, and getting that form completed is not without its difficulties.

To be eligible for the DTC, it’s necessary that the disability affecting the applicant be such that it limits or restricts activities of everyday life to a very significant degree. Consequently, the application form which must be completed by a medical practitioner must provide detailed information, not only on the medical aspects of the applicant’s condition, but on the very specific ways in which it affects that individual’s daily life and activities. As noted in the application form: “Eligibility for the DTC is not based solely on the presence of a medical condition. It is based on the impairment resulting from a condition and the effects of that impairment on the patient. Eligibility, however, is not based on the patient's ability to work, to do housekeeping activities, or to engage in recreational activities.”

Consequently, it’s necessary not just that the applicant have access to a doctor or other medical practitioner (which cannot be assumed in many provinces) but that that medical practitioner have sufficient familiarity with their patient’s day-to-day life to be able to certify the specific practical effects their disability has on their ability to live that life. In addition, many medical practitioners, who may be asked to complete a DTC application only infrequently, are often unfamiliar with the extraordinarily detailed criteria which can apply in each category. Where, as a result, the application filed does not sufficiently satisfy those detailed criteria, the outcome can be that the application is denied, simply as the result of deficiencies in the information provided in the application form.

That required application form (Form T2201, available on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2201.html) has two parts: Part 1 – the first two pages of the form – are completed by the applicant (or their representative), providing basic identifying information about the applicant and about any supporting person who will be claiming the credit or splitting the credit with the applicant. Part 2 of the form (the subsequent 14 pages) must be completed by the applicant’s medical practitioner. While the T2201 can be completed in hard copy, a digital version exists and is likely the easier option.

Once completed, the T2201 is submitted to the CRA by mail or online. Where hard copy is submitted by mail, it goes to the Tax Centre closest to the applicant’s location (a list of those Tax Centres is provided on the last page of the T2201 form). It’s important to be certain of using the most current DTC application form, as the CRA has announced that, effective as of September 8, 2026, older versions of the T2201 form (from before 2023) will no longer be accepted.

Online submissions of a T2201 can no longer, as of July 2026, be submitted through the “submit documents” section of an individual’s online CRA account (My Account).  Rather, all such online submissions must be made using the digital DTC application form.

An application for the DTC can be filed at any time in the year. Once an application is submitted, the CRA’s current estimate (as of September 2026) is that non-complex applications and those for which the CRA does not need to request additional information or documentation can be processed in about eight weeks. While the application is being processed, the applicant can check on the current status of that application through their online CRA account.

Individuals seeking to obtain approval for a DTC certificate can find the process difficult or intimidating and may be uncertain of how to obtain needed information or resources. There are, predictably, a number of for-profit businesses which advertise themselves as able to assist applicants with a DTC application. Applicants are well-advised to carefully assess such businesses before obtaining their assistance – and especially before agreeing to pay any fees levied for such assistance. Two points, in particular, should be kept in mind. First, no one can guarantee that an individual’s DTC application will be successful, but fees will often be payable regardless of the outcome of the application. Second, it’s important to remember that these are not service organizations, but for-profit businesses. A 100% guarantee of a successful application, especially when combined with fees that seem exorbitant, or must be paid upfront, should be a red flag that the business is one to steer clear of.

The best source of information on navigating the DTC application process should be the CRA website, where (at https://www.canada.ca/en/revenue-agency/services/tax/individuals/segments/tax-credits-deductions-persons-disabilities/disability-tax-credit.html) detailed information on the program, including links to additional guides and required forms, can be found.

Canadians have a well-deserved reputation for supporting charitable causes, through donations of both money and goods. For 2023, Statistics Canada’s figures show that there were just over 5 million tax filers who reported making a charitable donation during the year, with total charitable donations reaching $12.8 billion.

Canadians have a well-deserved reputation for supporting charitable causes, through donations of both money and goods. For 2023, Statistics Canada’s figures show that there were just over 5 million tax filers who reported making a charitable donation during the year, with total charitable donations reaching $12.8 billion.

Our tax system supports that generosity by providing both federal and provincial tax credits for qualifying donations made. 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 year. Consequently, as the calendar year-end approaches, it makes sense to start planning for charitable donations for 2026  

There is an additional reason, when planning charitable donations, to ensure that such donations are made by December 31. The credit provided by the federal government is a two-level credit, in which the percentage credit claimable increases with the amount of donation made. In 2026, for federal tax purposes, the first $200 in donations is eligible for a non-refundable tax credit equal to 14% of the donated amount. The credit for donations made during the year which exceed the $200 threshold is, however, calculated as 29% of the excess. Finally, where the taxpayer making the donation has taxable income (for 2026) over $258,482, charitable donations above the $200 threshold can receive a federal tax credit of 33%.

As a result of that two-level credit structure, the best tax result is obtained when donations made before the end of the calendar year are maximized. For example, a qualifying charitable donation of $600 made in December 2026 will receive a federal credit of $144.00 ($200 times 14% plus $400 times 29%). If the same amount is donated, but the donation is split equally between December 2026 and January 2027, meaning that a $300 donation is made in each year, the total credit claimable in each year will be $57.00, for a total federal credit of $114.00. As well, the credit for the donation made in 2027 cannot be claimed until the 2027 tax return is filed in the spring of 2028. And, of course, the larger the donation made in any one calendar year, the greater the proportion of that donation which will receive credit at the 29% level rather than the 14% level.

It’s also possible to carry forward, for up to five years, donations which were made in a particular tax year, but not claimed on the tax return for that year. So, if donations made in 2026 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 2021, 2022, 2023, 2024, or 2025 tax years can be carried forward and added to the total donations made in 2026, and the total then claimed on the 2026 tax return. There is a ceiling on the amount of donations which can be claimed in any one calendar year, but that ceiling is a very generous one – a taxpayer can claim any qualifying current or carryforward donations up to a limit of three quarters of the taxpayer’s net income for the year.

When claiming charitable donations, it’s possible to combine donations made by oneself and one’s spouse and claim them on one spouse’s return. Generally, it makes sense to do so, in order to maximize the total amount of donations claimed by a single individual, and therefore the amount of donations which can qualify for the higher tax credit rate(s). There is one caveat, however: the charitable donation tax credit is a non-refundable credit, meaning that it can reduce taxes payable, but cannot create or increase a refund. In deciding who should claim the charitable donation tax credit for total family donations it's necessary to make sure that that person has tax payable of at least the amount of the charitable donations tax credit to be claimed, as any credit amount in excess of that tax payable amount for the year will be lost.

Regardless of when a charitable donation is made or who claims it for tax purposes, would-be donors are well advised to carefully consider the charities to which they donate. It’s an unfortunate reality that while most organizations seeking charitable donations are legitimate, the charitable sector attracts perhaps more than its share of scammers and fraudsters who exploit the willingness of Canadians to help, but whose only aim is to personally profit from the generosity of others. Such charitable donation frauds arise most often whenever there are Canadian or world events like wars or natural disasters and people are particularly motivated to help. After every such event a flurry of “instant” charities spring to life, seeking donations which may or may not actually be used as represented. And, while some of the individuals or organizations who seek to raise funds in response to particular events may actually be both legitimate and well-intentioned, the reality is that they are unlikely to have either the infrastructure or the experience needed to actually carry out their stated or intended aims. And others, of course, are simply scammers seeking to capitalize on the desire of Canadians to help in response to disaster or other need.

There are two ways to ensure that one’s charitable dollar is actually used as intended. The first is to donate only to large international charities which have been in existence for some time and which have both expertise and experience in utilizing charitable donations in an efficient and effective way. However, where a donor is deciding whether to make a donation to a newer or less well-known charity, it’s relatively easy to find information about that charity on the website of the Canada Revenue Agency.

Only donations made to registered charities can be claimed for purposes of the charitable donations tax credit. The Canada Revenue Agency maintains on its website a listing of all such registered charities; that listing (which is searchable) can be found at https://apps.cra-arc.gc.ca/ebci/hacc/srch/pub/dsplyBscSrch?request_locale=en.

That webpage will also provide information on the charity’s activities, including the date on which it became a registered charity. Through that site (which is updated each business day by the Canada Revenue Agency), it’s also possible to obtain information on the countries in which the charity operates, the nature of its charitable activities, and details of its revenues and expenditures, all of which can help a would-be donor to determine whether or not to make a donation.

Detailed information on calculating and claiming the charitable donation tax credit is available on the same website at https://www.canada.ca/en/revenue-agency/services/charities-giving/giving-charity-information-donors.html.

Two quarterly newsletters have been added – one dealing with personal issues, and one dealing with corporate issues.

Two quarterly newsletters have been added – one dealing with personal issues, and one dealing with corporate issues.

They can be accessed below.

Corporate:

Issue #77 Corporate

Personal:

Issue #77 Personal

Most Canadians interact with the Canada Revenue Agency (CRA) just twice a year – once when they file the required annual tax return and the second time when they receive a Notice of Assessment with respect to the return filed a few weeks earlier.

Most Canadians interact with the Canada Revenue Agency (CRA) just twice a year – once when they file the required annual tax return and the second time when they receive a Notice of Assessment with respect to the return filed a few weeks earlier.

By the end of summer, virtually all Canadian taxpayers have filed their returns and received that Notice of Assessment. Hearing from the CRA, then, is a surprise, and generally not a welcome one. However, it’s not that unusual for the CRA to contact a taxpayer even after it has issued a Notice of Assessment for the return filed for the previous calendar year. In some cases, the CRA will have questions about information reported on the taxpayer’s return – perhaps an income amount reported does not match up with the amount reported to the CRA by the payor of that income. In other cases, the taxpayer may have claimed a deduction or credit, and the CRA wants the taxpayer to provide them with the receipt or other documentation to support that deduction or credit claim. In both cases, the CRA may contact the taxpayer to resolve the discrepancy or to obtain the needed information.

While no one particularly likes hearing from the tax authorities, it is critical that the taxpayer respond to any legitimate enquiry from the CRA. Failing to do so will mean that the claim made on the return for which documentation is being requested will be denied, because the taxpayer has not responded to requests to provide the CRA with that supporting documentation.

The problem which arises for the taxpayer is determining whether a communication received is in fact a legitimate request from the CRA or is part of a scam, phishing, or fraud attempt. Scams in which fraud artists claim to be from the CRA have become so commonplace over the past decade or so that by now almost everyone has received a fraudulent communication which purports to be from the tax authorities and which requests that the taxpayer provide financial or other information – or threatens dire consequences if the taxpayer fails to make an immediate payment. And, in the past several years, those fraudulent communications have become more and more sophisticated and hard to detect

Receipt of any communication which purports to be from the tax authorities therefore puts the taxpayer in a quandary. A legitimate query from the CRA cannot be ignored, but responding to a fraudulent communication (which can be as simple as clicking on a link in a fraudulent text message or email) can result in significant financial losses, or even identity theft. The resulting (and understandable) level of concern and suspicion on the part of taxpayers has even led to instances in which taxpayers refuse to speak to genuine CRA employees who are contacting the taxpayer in connection with legitimate CRA enquiries.

Some of the difficulty, ironically, likely arises from the fact that the CRA now utilizes most of the currently available communications technology to contact taxpayers. It’s certainly more efficient, but that expanded use of communications technology has had the inadvertent effect of making it easier for scammers to fraudulently represent themselves as being from the Agency. The CRA now contacts taxpayers by phone, by regular mail, by automated voicemail, by email, and by text. About the only method the CRA doesn’t use in communicating with taxpayers is social media. Consequently, a taxpayer who receives a communication by phone, email, or text (the favourites of scammers) can’t automatically assume that such communication is not legitimate – but it can be hard to tell when it is! To protect themselves, what taxpayers need to know is the purposes for which, and the circumstances in which, the CRA will use different communications methods.

To that end, the CRA has made ongoing efforts, primarily through its website, to provide information on how it uses different communication methods to contact taxpayers. The Agency’s goal is two-fold: the first, of course, is to help taxpayers avoid becoming yet another victim of scams and frauds, and the second is to prevent situations in which taxpayers ignore legitimate communications from the Agency, having dismissed them as just another fraud or phishing attempt.

The following summary outlines just when the CRA will (and perhaps more importantly, when it will not) use a particular communication method to contact a taxpayer, and how to know whether a particular communication is in fact a legitimate one.

If you receive a phone call or an automated message

In a phone call, the CRA may ask for any of the following:

• personal information to verify the taxpayer’s identity, including their name, date of birth, or Social Insurance Number (SIN);
• details or additional information needed for the taxpayer’s tax account, such as receipts or supporting documents;
• tax returns which the taxpayer has not filed; or
• financial information, such as the taxpayer’s bank's name and location

If the taxpayer has an outstanding debt owed to the CRA, the Agency may:

• ask for payment of any amount owing, using the CRA's payment options, or
• notify the taxpayer about possible legal actions to recover unpaid debts.

Finally, the CRA may notify a taxpayer by telephone or automated message about any of the following events:

• a tax return is being reviewed;
• a recent GST/HST registration is being reviewed;
• a GST/HST registration requirement is being reviewed;
• a CRA user ID and password have been revoked;
• a Notice of Assessment or Reassessment is being sent; or
• an audit process is being initiated.

Finally, the CRA may contact a taxpayer by phone or automated message to offer a service, including a reminder of an upcoming income tax filing deadline or a tax instalment payment due date, or support to help the taxpayer access benefits and credits. It’s important to note that the Agency’s automated system only leaves a message and never includes or asks for taxpayer personal information. 

If you receive an email

The CRA will send an email to a taxpayer in only two situations:

• the taxpayer has registered for email notifications and is being notified that there is a new message to view in their CRA online accounts; or
• the taxpayer has requested, in a phone call or a meeting with a CRA client services agent, that a CRA link, form, or publication be sent.

When an email purporting to be from the CRA is received, it’s important to remember that legitimate emails from the Agency will not be from a specific user, will not ask the taxpayer to reply to the email, and will not include a link asking the taxpayer to enter personal or financial information. Any emails which include any of these features should be deleted.

If you receive a text or instant message

The CRA does utilize text messaging, but only for very limited and specific purposes. The Agency only sends text messages as part of the multi-factor authentication process for all of its online sign-in services, and only if the taxpayer enrolled in that service (like My Account) and selected the telephone option.

As well, the CRA will not use instant messaging such as Facebook Messenger or WhatsApp.

If you receive a phone call

Phone calls from someone claiming to represent the CRA are among the most difficult communications for taxpayers to assess with respect to authenticity, as the recipient of the call has to make an on-the-spot determination about whether the unfamiliar voice on the telephone is in fact a CRA employee. There are, however, procedures and processes in place to help.

Legitimate CRA employees will identify themselves when they contact a taxpayer and will provide that taxpayer with their name and phone number to call them back, if asked. (Taxpayers should be aware that relying on call display to verify the source of the call is not a good idea, as scammers have been able to manipulate technology to “spoof” a legitimate CRA phone number.)

The Agency suggests that where there is any doubt about the identity of a caller claiming to be from the CRA, taxpayers consider taking the following steps to ensure that they are in fact speaking to a CRA employee:

1. Tell the caller you would like to first verify their identity.
2. Request and make a note of their:

• Name,
• phone number to call back, and
• office name or location.

Each of these verification steps should be taken before providing any information to the caller.

Especially during tax filing season, taxpayers often contact the CRA through one of its individual or business tax help lines, which are answered by call centre agents. Each of those telephone services offers an automated callback service, used when wait times reach a certain threshold (as they often do during the busiest times). That service gives the taxpayer the option of receiving a callback rather than continuing to wait on hold. Where the taxpayer chooses the callback option, they are provided with a randomized four-digit confirmation number. The CRA call center agent who returns the taxpayer’s call will repeat that number, so that the taxpayer can be certain that it is a CRA employee who is calling.

While scams and frauds and their perpetrators have been around for literally centuries, changes in technology mean that most taxpayers are now accustomed to and at ease with conducting much of their personal and financial lives online or on their cell phones, making it much easier to carry out such deceptions. And even newer technology, like AI, poses additional threats for the future. In such an environment, the taxpayer’s best protection is to double-check in order to verify the legitimacy of any unsolicited contact received with respect to matters of tax or personal finances. Protecting one’s financial and personal information in this way is no longer just prudent, it’s a necessity.

The phrase “affordability crisis” is one that is now familiar to all Canadians. The cost of living has been on a steady upward trend for the past number of years, and the increase in living costs has hit particularly hard in an area where expenditures are completely non-discretionary – the cost of food. Individuals and families may be able to put off replacing their current vehicle, or forgo the annual vacation, but there is no scenario in which expenditures on groceries can be considered discretionary.

The phrase “affordability crisis” is one that is now familiar to all Canadians. The cost of living has been on a steady upward trend for the past number of years, and the increase in living costs has hit particularly hard in an area where expenditures are completely non-discretionary – the cost of food. Individuals and families may be able to put off replacing their current vehicle, or forgo the annual vacation, but there is no scenario in which expenditures on groceries can be considered discretionary.

The relentless upward trend in the cost of food has been noted repeatedly by Statistics Canada in its publications. StatsCan figures show that, as of July 2026, Canadians were paying around 30% more for food than they were in July 2020. As well, increases in the cost of groceries have outpaced the general rate of inflation in every single month since early 2025.

When prices for non-discretionary spending items increase in that way it’s noticed by everyone, but has a disproportionate impact on those who are living on a fixed income and who must, therefore, spend an ever-increasing percentage of that income on such non-discretionary spending. While such individuals and families can be found in all age groups, retirees make up the largest Canadian demographic who live on such fixed incomes.

For many Canadian retirees, benefits received from the Canada Pension Plan (CPP) and Old Age Security (OAS) program make up a substantial portion of their annual income. And while both CPP and OAS payment amounts are indexed to inflation, that indexation is based on the overall or general rate of inflation. Where the cost of necessities, like groceries, increase much more than the general rate of inflation, the indexing of CPP and OAS benefit amounts just doesn’t keep up with those changes, creating a cash flow shortfall for many retirees.

In addition to dealing with increased living costs, retirees are also dealing with interest rates which have declined over the past three or four years, meaning a decrease in investment income for the majority of retirees who invest their retirement savings in lower-risk vehicles like guaranteed investment certificates.

It must seem to Canadian retirees that there just aren’t many good options when it comes to generating the cash flow needed to cover ever-increasing costs for non-discretionary expenditures. Fortunately, however, the majority of Canadians who are over the age of 60 own their own homes, and that fact provides them with additional options. Canadians who are now in retirement and own their homes most likely purchased those homes many years or even decades ago and have consequently built up significant equity. In the current economic circumstances, that equity has made them house-rich and cash-poor. And that equity can now provide an ongoing source of retirement income – through a reverse mortgage or a home equity line of credit (HELOC). Both such financial products have the same basic structure, which is to allow homeowners to borrow against the value of the equity which they have in their home. In both cases there will be costs associated with taking out a HELOC or reverse mortgage which must be borne by the homeowner, including appraisal costs and other administrative fees. There are, however, definite differences between a HELOC and a reverse mortgage, in terms of costs and benefits, and an individual homeowner’s circumstances will determine which such product (if either) makes the most sense for them.

The HELOC, as the name implies, is a line of credit which permits the homeowner to borrow up to a pre-set limit, based on the current market value of their home. Such borrowings can be in any amount (to a maximum of 65% of the value of the home, or the amount of equity the homeowner has in the home, whichever is less) and can be made at any time and for any purpose. Typically, the interest rate charged on a HELOC is a variable rate – usually one half or one percent more than the prime rate used by the lender. There is, however, a significant feature of the HELOC of which potential borrowers must be aware. While there is generally no obligation to repay amounts borrowed from a HELOC until either the death of the homeowner or until the house is sold, borrowers are required to pay interest each month on the total amount borrowed.

Take, for example, a couple who own a house currently valued at $750,000. Assume that the couple obtain a HELOC based on that home value and borrow $1,000 each month ($12,000 annually), from the HELOC to help meet current cash flow shortfalls. At an interest rate of 5.50%, they will be obliged to make an interest payment of approximately $55 per month on that $12,000 borrowing. As the amount of HELOC indebtedness increases over time, or the interest rate charged goes up, the amount of those required monthly interest payment obligations will, of course, also increase.

The other major option open to homeowners is the reverse mortgage. Most Canadian homeowners will be familiar with at least the concept of a reverse mortgage, as those products have been heavily advertised in Canadian media. Like a HELOC, a reverse mortgage allows homeowners who are age 55 and older to borrow based on the market value of their property – up to 55% of the home’s market value or the amount of equity they have in the home, whichever is less. A reverse mortgage is also similar to a HELOC in that borrowers can borrow a lump-sum amount, or can opt to structure the reverse mortgage as a series of payments which will provide a regular income stream, or some combination of the two. And, as with a HELOC, no repayment of the funds advanced under a reverse mortgage is usually required until the death of the homeowner, or until they leave or sell the home.

The basic advantage of a reverse mortgage over a HELOC is that the homeowner is not required to make any payments of interest amounts charged. However, homeowners need to consider the impact that advantage can have over time. Once the reverse mortgage is taken out, interest (usually at a rate higher than would be charged for a HELOC) will, of course, be levied on all amounts borrowed, and will accumulate from the time the funds are first advanced. Total interest costs can add up very quickly and reach significant amounts by the time the debt is eventually to be repaid, usually out of the proceeds from the sale of the house.  And, of course, every dollar of funds advanced and interest levied reduces the amount of equity which the homeowner has built up, on a dollar-for-dollar basis. By contrast, with a HELOC, where accrued interest charges must be paid monthly, the amount of debt (and consequent reduction in equity) will never be greater than the principal amount borrowed. Finally, under the terms of many reverse mortgages, a prepayment penalty is levied where the homeowner moves or sells the house within a few years of obtaining the reverse mortgage – the exact time frame will depend on terms provided by the particular lender. With a HELOC, however, repayment of the outstanding balance can be made in part or in full at any time, without penalty.

As is almost always the case with financial issues, there is no one right answer or even a one-size-fits-all answer, as the “correct” answer is always based on the particular financial and life circumstances of the individuals involved. Help in making that decision – including a listing of the benefits and downsides of each option – can be found in a very comprehensive summary of the features of HELOCs and reverse mortgages, which is available on the website of the Financial Consumer Agency of Canada at  https://www.canada.ca/en/financial-consumer-agency/services/loans.html.

Tax-free savings accounts (TFSAs) were first introduced in 2009 and so have been available to Canadians for just under 20 years. Many Canadians have taken advantage of the benefits offered by such plans – in 2023, according to Statistics Canada, more Canadians contributed to a TFSA than to a registered retirement savings plan (RRSP), and the median contribution amount was higher for TFSAs than for RRSPs.

Tax-free savings accounts (TFSAs) were first introduced in 2009 and so have been available to Canadians for just under 20 years. Many Canadians have taken advantage of the benefits offered by such plans – in 2023, according to Statistics Canada, more Canadians contributed to a TFSA than to a registered retirement savings plan (RRSP), and the median contribution amount was higher for TFSAs than for RRSPs.

However, when those figures are compared to the number of Canadians who were actually eligible to contribute to a TFSA during 2023, the picture is not quite as positive. Based again on StatsCan figures, there were nearly 32 million Canadians who could have contributed to a TFSA during 2023, and statistics show that around 85% of those individuals did not make any TFSA contribution during the year.

The extent to which Canadians are not taking advantage of their TFSA savings opportunities could be attributable, to some degree, to unfamiliarity with the advantages that a TFSA can offer. Although TFSAs have been around for nearly 20 years they are nonetheless likely less familiar to Canadians than the better-known RRSPs. As well, when it was first introduced, the TFSA program suffered from a certain amount of “bad press”, in that the rules were not necessarily well understood (even by financial advisers), which led, in some instances, to penalties being imposed on individuals who had (in many cases inadvertently) run afoul of the rules around contributions and, especially re-contributions.

What follows is a summary of the current rules which govern TFSA plans, including who can contribute, how much can be contributed, how investment income earned and withdrawals made from a TFSA are treated for tax purposes, when and how contribution limits can be carried forward and/or withdrawn amounts re-contributed, and finally, what happens to a TFSA on the death of the planholder.

In addition, while saving through any tax-assisted savings plan is a worthwhile goal, a taxpayer’s particular circumstances can make one type of plan a better choice than another. The circumstances in which a TFSA is the better (and sometimes the only) choice for saving on a tax-assisted basis are outlined below.

The basic rules governing TFSAs are quite straightforward. Every resident of Canada who is 18 years of age or older and has a valid Social Insurance Number can open a TFSA and contribute to that plan. The amount which can be contributed each year is set by law and is the same for every Canadian, regardless of income, province of residence, or any other personal circumstances. That amount is indexed to inflation, rounded to the nearest $500. For 2026, the annual TFSA contribution limit is set at $7,000.

Amounts contributed to a TFSA are not deductible from income, but all investment income (of any type) earned by those amounts while they are in the TFSA can compound free of tax. Finally, all amounts withdrawn from a TFSA are received free of tax, whether those amounts represent original contributions made, or investment gains earned, on those contributions. The TFSA is, in many ways, the obverse of an RRSP – with an RRSP contributions made are deductible from income but all amounts withdrawn, whether original contributions or investment gains earned, are fully taxable in the year such withdrawals are made.

Where funds are withdrawn from a TFSA, the taxpayer can re-contribute the same amount, but only after January 1^st of the year following the year the withdrawal was made. That re-contribution amount is additional to any current year contribution the taxpayer can make to their TFSA. For example, a taxpayer who withdrew $5,000 from their TFSA in 2025 will be able to re-contribute that amount to the TFSA in 2026, and can also contribute up to $7,000 as a current year contribution for 2026.

Finally, on the death of a TFSA planholder, the amounts within the deceased’s TFSA retain their tax-free status. While the specific rules differ, depending on the relationship (spouse/family member/non-family member) of the beneficiary to the deceased TFSA planholder, generally funds held in the TFSA are received tax-free by the beneficiary (whether named under the TFSA plan or in a will) who can then contribute such amounts to their own TFSA, within specified limits. By comparison, on the death of holders of other tax-assisted savings plans, like an RRSP or a registered retirement income fund (RRIF), all amounts in the plan (unless left to a surviving spouse) are treated as income to the planholder for the year of their death and taxed as such.

While the Canadian tax system offers a range of ways to save on a tax-assisted basis, the particular attributes of each option will drive the decision on which option is best in the taxpayer’s particular financial and tax situation. Some of the circumstances in which the TFSA is likely the best (or sometimes the only) option are as follows.

When the savings goal is short-term

Where savings are being put aside for an expenditure that is likely to be made in the next five years (like a new car, a wedding, or a “bucket list” vacation), saving through a TFSA is almost certain to be the better option. Taxpayers in that situation are sometimes tempted to make an RRSP contribution instead, in order to get a tax refund, and then to withdraw the funds when the planned expenditure is to be made. However, while choosing that option will provide a deduction on this year’s return and probably generate a tax refund, tax will still have to be paid when the funds are withdrawn from the RRSP a year or two later. And, more significantly from a long-term point of view, using an RRSP in this way will eventually erode one’s ability to save for retirement, as RRSP contributions which are withdrawn from the plan cannot be replaced – the contribution room used to make that contribution is permanently lost. While the amounts involved may seem small, the loss of compounding on even a relatively small amount over 25 or 30 years can make a significant dent in one’s ability to save for retirement.

Where both pre- and post-retirement annual income is similar

One of the greatest benefits of contributing to an RRSP is the permanent tax savings which can be realized. To do so, the taxpayer contributes to an RRSP and claims a deduction for such contributions during their peak earning years when income (and therefore the tax rate applied to that income) is higher, and then withdraws those amounts during retirement, at a time when income (and consequently the tax rate imposed) is lower, thereby realizing a permanent tax savings.

That benefit is erased where pre-retirement and post-retirement income are roughly the same, and especially when both amounts fall within the lowest federal income tax bracket. For 2026, that bracket covers income up to about $58,500. If it’s likely that annual income (and therefore tax amounts payable) will be roughly the same both before and after retirement, the income differential which enables the permanent tax savings resulting from RRSP contributions is no longer a factor, and the TFSA becomes a better vehicle for retirement savings.

There is another benefit of accumulating retirement savings within a TFSA rather than an RRSP, especially for lower and middle-income taxpayers. Our tax system provides a number of tax credits and benefits for which eligibility is determined, at least in part, by the income of the recipient taxpayer. Where funds are withdrawn from an RRSP, they are fully taxed as income and are included in income for the purpose of determining the individual’s eligibility for such tax credits and benefits. Conversely, funds withdrawn from one’s TFSA are not subject to tax and, in addition, are not included in income when determining eligibility for any federal or provincial tax credits or benefits.

When RRSP contribution room is reduced

The minority of Canadian taxpayers who belong to an employer-sponsored registered pension plan (RPP) save some percentage of income for retirement through contributions made to that RPP, with the employer also making a contribution to the benefit of the employee. The value of benefits earned under the RPP each year by the employee is known as a pension adjustment, and generally any such pension adjustment reduces the employee’s ability to contribute to an RRSP in the following year. Where the ability to contribute to an RRSP is limited in this way, a TFSA is likely the best available alternative for tax-assisted savings.

Where no RRSP contribution can be made

In some cases, the RRSP versus TFSA decision is easy – in the sense that no choice is available – and that’s the case for all Canadians who are over the age of 71

All individual Canadians must collapse their RRSPs by the end of the year in which they turn 71, and no RRSP contributions can be made after that time. Practically speaking, a TFSA is the only tax-sheltered savings vehicle to which taxpayers over age 71 can contribute, as a TFSA can be opened, or a contribution made to an existing TFSA, at any age.

Most taxpayers over the age of 71 have transferred their RRSP savings to a RRIF and are required to withdraw a specified percentage of funds from that RRIF each year. Taxpayers who are in the fortunate position of having such income in excess of current cash flow needs can contribute some or all of such amounts to a TFSA, to the extent of their TFSA contribution room for the year. While the RRIF withdrawals must still be included in income and taxed in the year of withdrawal, transferring the funds to a TFSA will allow them to continue to be invested and to compound free of tax. No additional tax will be payable when any funds in the TFSA are withdrawn and, unlike RRIF or RRSP withdrawals, monies withdrawn in the future from a TFSA will not affect the planholder’s eligibility for Old Age Security benefits or other means-tested tax credits.

While it’s unlikely that many of them do so with any great degree of enthusiasm, the vast majority of Canadian taxpayers meet their tax filing obligations each spring, by completing and filing the annual tax return. And, in most cases, the return filed is correct and complete.

While it’s unlikely that many of them do so with any great degree of enthusiasm, the vast majority of Canadian taxpayers meet their tax filing obligations each spring, by completing and filing the annual tax return. And, in most cases, the return filed is correct and complete.

While that’s the desired result, it can be derailed in any one of a number of ways. Our tax system is complex, to such an extent that making a mistake on one’s tax return isn’t at all remarkable – generally, through a misunderstanding of the tax rules, or how they apply in the taxpayer’s particular situation. In other cases, taxpayers may fail to file a return at all. In many cases, where the taxpayer owes taxes on filing and doesn’t have the means to pay them, the (incorrect) conclusion reached is that it’s better not to file at all. And, inevitably, there are situations in which the taxpayer simply chooses not to file, or files a return in which income amounts or available deduction or credit claims (or both) are misstated.

Whatever the reasons or circumstances, a failure to file a tax return when required, or misstating income or deduction and credit amounts on a return, can be very costly to the taxpayer. By law, the Canada Revenue Agency (CRA) charges interest on overdue or insufficient payments of tax at higher than commercial rates. Currently, and until the end of the 2026 calendar year, the rate of interest levied is 7%. In addition, all interest amounts levied are compounded daily, meaning that each day interest is charged on the previous day’s interest. Not surprisingly, under such rules, interest charges can accumulate quickly, even over a relatively short period of time.

In addition to levying interest charges on underpayments or late payments of taxes owed, the CRA also imposes penalties where a return is not filed on time, with such penalties calculated as a percentage of tax owed at the time of filing. The first such late filing will result in an immediate penalty of 5% of any tax amount owed. In addition, a penalty of 1% per month is levied for each full month that the return is not filed, to a maximum of 12 months.

Late-filing penalties are increased substantially where a first-instance penalty was imposed in any of the previous three years. In such case, the immediate late filing penalty increases to 10% of any tax amount owed, and the monthly penalty imposed increases to 2% per month, to a maximum of 20 months. In a worst-case scenario, where a late-filing penalty has been imposed in the previous three years, and a subsequent return is filed more than 20 months after the due date, the total penalty charge will reach 50% of tax amounts owed. And, finally, interest is levied on all such penalty amounts, as well as on overdue tax amounts, and all such interest charges levied are compounded daily.

Given the substantial interest and penalty amounts for which they may be liable, it’s understandable that taxpayers who are in arrears with respect to their tax filing and/or tax payment obligations feel some trepidation about coming forward to disclose those delinquencies.

Fortunately for such taxpayers, there is an alternative in the form of the CRA’s Voluntary Disclosure Program (VDP). That program allows taxpayers to come clean with the tax authorities with respect to past tax transgressions on what amounts to a no-fault basis. Specifically, taxpayers are incentivized to participate in the VDP by the CRA’s policy that, while any income tax amounts owed will have to be paid, in most cases interest or penalty amounts which would ordinarily be assessed in addition to tax amounts owed will be reduced, or forgiven altogether. In addition, taxpayers who participate in the VDP will not face any criminal prosecution for past instances of tax evasion.

In October of 2025, the CRA made changes to the VDP, with the goal of making the program more accessible to Canadian taxpayers and expanding the level of relief which can be provided.

Under the rules which apply to voluntary disclosures made on or after October 1, 2025, a VDP application accepted by the CRA will be characterized as either an unprompted or a prompted application. The distinction between the two is an important one, as the kind and level of relief which the taxpayer may obtain differs significantly depending on the category into which their VDP application is assigned.

Generally, an unprompted application is what it sounds like – an application made to the CRA with respect to past tax transgressions that is made before any communication about those transgressions is received from the CRA. More technically, as explained in the Information Circular issued by the CRA, an unprompted application is defined as follows:

“An application is generally considered unprompted in the following situations:

• an application is made when there has been no communication (verbal or written) about an identified compliance issue related to the disclosure
• an application is made following an education letter or notice that offers general guidance and filing information related to a particular topic.”

Where a VDP application is received by the CRA and is accepted and determined to be an unprompted application, tax owing will have to be paid, but 75% of the applicable interest charges and 100% of the applicable penalties will be waived. In other words, a taxpayer who makes a VDP application which is accepted by the CRA as an unprompted application will be required to pay all taxes owed and 25% of applicable interest charges but will not have to pay any penalties and will not be subject to criminal prosecution.

As might be expected, the available relief for those who make a prompted application is not as extensive. For purposes of the VDP, a prompted application is defined in the Information Circular as follows:

“An application is generally considered prompted in the following situations:

• an application is made following verbal or written communication about an identified compliance issue related to the disclosure, which may include letters or notices (excluding education letters) to the taxpayer with one or more of the following:
  • an identification of a specific error or omission found on the taxpayer's account
  • a deadline to correct an error or omission, where there is an expectation for the taxpayer to file or comply
• an application is made after the CRA has already received information from third party sources regarding the potential involvement of a specific taxpayer (or of a related taxpayer) in tax non-compliance.”

In sum, an unprompted application for the VDP can be made by a taxpayer only where they have NOT been contacted by the CRA with respect to an identified compliance issue related to the subject matter of the disclosure, and the CRA has NOT received information about the taxpayer’s non-compliance from a third-party source. If either of those two circumstances exist, any VDP application made and accepted by the CRA will be treated as a prompted application.

Where a VDP application is accepted as a prompted application, the taxpayer will be required to pay all tax amounts owed. They will receive 25% relief of the applicable interest charges and up to 100% relief of the applicable penalties and will not be subject to criminal prosecution. In other words, they will be required to pay all taxes owed and 75% of all accrued interest charges. Penalty amounts assessed may be forgiven, but the degree to which such penalty relief will be provided is discretionary on the part of the CRA.

Taxpayers who are considering making an application under either stream of the VDP might understandably feel some trepidation about coming forward to do so. It is possible, however, for any taxpayer considering such a step to consult with CRA officials for what is termed a “pre-disclosure discussion”. That discussion is conducted on an anonymous basis, to enable the taxpayer to obtain information about the kinds of relief which may be available in their particular circumstances, and is not binding on either party. Taxpayers who wish to pursue a pre-disclosure discussion can call the CRA’s Income Tax Enquiries Line at 1-800-959 8281 to make such arrangements.

Making a voluntary disclosure to the CRA, especially where a significant amount of tax and/or interest and penalty amounts are owed, is a significant step which will inevitably mean a financial cost to the taxpayer. However, taxpayers should keep in mind the fact that the costs involved will be significantly higher, and that a worst-case scenario can include criminal prosecution, where past tax transgressions are discovered by the CRA and collection and enforcement action is taken outside of the Voluntary Disclosure Program.

Information about the changes to the VDP for disclosures made on or after October 1, 2025 can be found on the Agency’s website at https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/voluntary-disclosures-program/changes-vdp.html. The updated Information Circular, which provides significantly more detailed information about those changes, is available on the same website at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/ic00-1.html.

As is commonly known, the purchase of a home represents the largest single financial transaction most Canadians will make in their lifetime. However, buying a home represents much more than a financial transaction, however large that transaction may be. The purchase of a home brings with it a sense of both accomplishment and security, as well as the opportunity to build equity in that property over the long term.

As is commonly known, the purchase of a home represents the largest single financial transaction most Canadians will make in their lifetime. However, buying a home represents much more than a financial transaction, however large that transaction may be. The purchase of a home brings with it a sense of both accomplishment and security, as well as the opportunity to build equity in that property over the long term.

In addition to building equity, of course, most home purchasers buy with the expectation that the value of their home will increase over the long term. That’s an expectation that is virtually always realized: while the real estate market always has its ups and downs over everyone’s period of home ownership, the cost of property always increases over the long term.

That increase in the market value of their property is what many homeowners count on to provide not just current financial security, but a retirement nest egg – and often a source of income to supplement Canada Pension Plan and Old Age Security benefits during retirement.

Anyone who was fortunate enough to purchase a home more than 10 or 15 years ago likely now owns a property which has a current market value of many times more than the original purchase price. The real benefit of such asset growth, however, is found in the way such increases in value are treated for tax purposes.

The Canadian tax system is a very comprehensive one, and there are very few sources of employment, business, property, or investment income which escape the tax net. Home ownership is one of those few exceptions. Under general Canadian tax rules, where an asset is sold the increase in the value of that asset over its original purchase price is treated as a capital gain, 50% of which must be included in taxable income and taxed as such. However, where a family home is sold, any increase in value (that is, any gain) is exempt from tax – regardless of the amount of such gain – as long as the home has been used as what is known in tax parlance as a “principal residence” throughout the entire period of ownership. For example, a homeowner who paid $200,000 for a home in 2000 and sold that home in 2026 for $1,000,000 has a gain of $800,000. Assuming that the property was lived in and used as a principal residence for the entire 26 years of ownership, the full $800,000 gain can be received tax-free. If that gain were treated as a capital gain, and taxed as such, approximately $200,000 of the gain would have to be paid as tax on the transaction.

The tax-free status of gains made on the sale of a family home is known in our tax system as the principal residence exemption (PRE), and that exemption has been available to Canadians for many decades. For many years after the introduction of the PRE there were no changes made to the rules governing the availability of the exemption, or the reporting requirements for claiming it. Over the past ten years, however, and especially in 2023, the rules with respect to the availability of the exemption were tightened.

The need for the 2023 changes arose out of a perceived change in the way the housing market operated, resulting from unprecedented increases in the price of residential properties over a relatively short period of time. While there are have always been individuals or companies who purchased properties with the intent of reselling them, perhaps after undertaking renovations, most purchases of residential real estate were made by individuals or families intending to live in them. However, in some Canadian real estate markets over the past 10 or 15 years, it was possible to purchase a property and re-sell it relatively soon thereafter for a very substantial profit. And, where the PRE was claimed on that sale, the entire profit would be received tax-free.

These changes in the housing market led to what the federal government perceived as a situation in which housing was being bought and sold as a commodity rather than for its traditional purpose of providing a home, and that the PRE was being used to avoid the payment of profits made from the “flipping” of properties in a way that was never intended. A secondary effect of such “commodification” of residential real estate was to drive up the price of properties, putting home ownership further and further out of reach for the average Canadian, especially younger people.

For both these reasons, the federal government moved, in 2016 and again in 2023, to make changes to ensure that the principal residence exemption was being used for its intended purpose, and only by those who were entitled to claim it.

The first, smaller, change (which took effect beginning with the 2016 tax year) was an administrative measure which required taxpayers, for the first time, to report any transaction for which the PRE was being claimed.  Since then, individuals who are claiming the PRE for a property sale which took place during the year are required to  report the sale on Schedule 3, Capital Gains or Losses and must, in addition, complete Form T2091(IND), Designation of a Property as a Principal Residence by an Individual (Other Than a Personal Trust), designating the particular property as their principal residence.

The second change made by the federal government with respect to the PRE was much more substantive, and aimed directly at those who, in the government’s view, had been misusing the PRE. That change, which took effect beginning in 2023, provides that anyone who sells a residential property which they have owned for less than 365 days is considered to be “flipping” properties. Where that is the case, 100% of any gain made on the sale of the property is included in income and taxed as business income. In other words, not only would the seller of the property not be able to claim the PRE, the gains made on the sale of the property would not be treated as a capital gain (only half of which is included in income for tax purposes) but as business income, the entirety of which is included in income and taxed as such.

The difference in the tax result is best illustrated using the example above. An individual who purchases a property for $200,000 and sells that property for $1,000,000 has a gain of $800,000. The result of the different possible tax treatments of that gain is as follows:

• Where the sale is fully eligible for the principal residence exemption, the total tax payable on the gain is $0;
• Where the gain is treated as a capital gain, the total tax payable on that gain is around $200,000; and
• Where the property sale takes place after 2022, the property was owned for less than 365 days, and the transaction is treated as property flipping, the new rule will apply and the total tax payable on the gain will be about $400,000.

Of course, while most Canadians who purchase a home to live in as a principal residence don’t intend to sell within a year of purchase, life’s circumstances can sometimes dictate a different outcome. Consequently, the rules provide for exemptions from the tax consequences of selling within 365 days of purchase. Generally, those exemptions are available where Canadian homeowners sell their home due to certain specified life events. 

The current reporting rules require that anyone who sells a residential property during the year, has owned that property for 365 days or longer, and is claiming the principal residence exemption must report that sale on Part 2 of Schedule 3 of their return for that year. In that section, the taxpayer is required to designate the property which has been sold as their principal residence (while also providing detailed information on that property on Form 2091 (IND)), and to indicate the number of years during the period of ownership the property was used as a principal residence. Where, as is most often the case, the number of years of ownership will be identical to the number of years that the property was used as a principal residence, the entire gain realized on the sale of the property will qualify for the principal residence exemption and therefore be non-taxable.

Where a taxpayer has sold a residential property during the year and that sale took place within 365 days of the date of acquisition of that property, the taxpayer must complete Part 1 of Schedule 3, to determine whether the sale does or does not constitute “property flipping”. The taxpayer is asked to indicate whether they sold a housing unit during the year, and within 365 days of acquiring it. Where the answer to that question is “yes”, the taxpayer can indicate whether the sale was “due to, or in anticipation of” any one or more of nine different “life events”.

That listing of “life events” is quite extensive, and includes all of the following:

• the death of the taxpayer or a related person;
• a related person joining the taxpayer’s household or the taxpayer joining a related person’s household (for example, moving in with a spouse or common-law partner, for the birth of a child, adoption, or care of an elderly parent);
• the breakdown of a marriage or common-law partnership where the taxpayer had been living separate and apart from their spouse or common-law partner for at least 90 days before the disposition;
• a threat to the personal safety of the taxpayer or a related person (for example, domestic violence);
• a serious disability or illness of the taxpayer or a related person;
• the eligible relocation of the taxpayer or their spouse or common-law partner where the taxpayer’s new home is at least 40 kilometers closer to the new work location or school (generally, an eligible relocation allows the taxpayer to carry on business, be employed, or attend full-time post-secondary education);
• the involuntary termination of employment of the taxpayer or their spouse or common-law partner;
• the insolvency of the taxpayer; or
• the destruction or expropriation of the taxpayer’s property (for example, when the property is destroyed due to natural or man-made disaster).

In addition, it is not necessary for such circumstances to have actually occurred prior to the sale; it is sufficient that the sale have taken place “in anticipation of” the particular life event or events. Where these criteria are satisfied, the sale of a residential property within 365 days of its acquisition will be considered to not constitute property flipping, and any gain realized on the sale can qualify for the principal residence exemption (assuming that the taxpayer actually used the property as a principal residence during the part-year that they owned it).

Most Canadians buy a property for the purpose of living in and using that property as a family home/principal residence and such individuals will not encounter any tax consequences when the property is eventually sold. Only in the relatively unusual case where a property is sold within 365 days of its acquisition do the rules apply to deny the homeowner access to the PRE, and then only where that homeowner cannot avail themselves of any of the “life circumstances” exemptions listed above. In the vast majority of cases, homeowners can be assured that the years of making mortgage payments and maintaining and/or making improvements to their home will be “rewarded” by receipt of a substantial financial gain, on which no tax is levied.

More information on the rules governing the sale of a principal residence and how to claim the PRE can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-12700-capital-gains/principal-residence-other-real-estate.html.

Like most good professional advice, legal fees can be costly. And, adding insult to injury, the need to seek out and obtain legal advice (and to pay for it) is usually associated with life’s more unpleasant events – a divorce, a dispute over a family estate, or a job loss. About the only thing that mitigates the pain of paying legal fees (apart, hopefully, from a successful resolution of the problem that created the need for legal advice) would be being able to claim a tax credit or deduction for the fees paid.

Like most good professional advice, legal fees can be costly. And, adding insult to injury, the need to seek out and obtain legal advice (and to pay for it) is usually associated with life’s more unpleasant events – a divorce, a dispute over a family estate, or a job loss. About the only thing that mitigates the pain of paying legal fees (apart, hopefully, from a successful resolution of the problem that created the need for legal advice) would be being able to claim a tax credit or deduction for the fees paid.

Unfortunately, while there are some circumstances in which such a deduction can be claimed, those circumstances don’t usually include the routine reasons – purchasing a home, getting a divorce, establishing custody rights, or seeking legal advice about making a will or managing a family estate – for which most Canadians incur legal fees. Generally, personal (as distinct from business-related) legal fees become deductible for most Canadian taxpayers only where they are seeking to recover amounts which they believe are owed to them, particularly where those amounts involved employment or employment-related income or, in some cases, family support obligations.

The first situation in which legal fees paid may be deductible is that of an employee seeking to collect (or to establish a right to collect) salary or wages. Canadian employment standards laws provide that an employee who is about to lose their job (for reasons not involving fault on the part of the employee) is entitled to receive a specified amount of notice, or salary or wages equivalent to such notice. In many cases, however, the employee can establish a right to a period of notice (or payment in lieu) greater than the statutory minimum. The amount of notice or payment in lieu of notice which is payable can then become a matter of negotiation between the employer and its former employee, and such negotiations usually involve legal representation and consequently, legal fees. In that situation, legal fees incurred by the employee to establish a right to amounts allegedly owed by the employer are deductible by that former employee. If a court action is necessary and the Court requires the employer to reimburse its former employee for some or all of the legal fees incurred, the amount of that reimbursement must be subtracted from any deduction claimed. In other words, the former employee can claim a deduction only for legal fees which they were personally required to pay in order to collect wages or salary owed and for which they were not reimbursed.

In some situations, an employee or former employee seeks legal help in order to collect or to establish a right to collect a retiring allowance or pension benefits and, in such situations, the legal fees incurred can be deducted. The maximum available deduction available for legal fees incurred is the total amount of the retiring allowance or pension income actually received for that year, minus any amount transferred to a registered retirement savings plan or a registered pension plan. “Excess” legal fees that cannot be deducted in the current year can be carried forward and claimed in any of the next seven years.

The rules covering the deduction of legal fees incurred where an employee claims amounts from an employer or former employer are relatively straightforward. The same, unfortunately, cannot be said for the rules governing the deductibility of legal fees paid in connection with family support obligations. Those rules have evolved over the years in a somewhat piecemeal fashion, and the current rules are as follows.

Legal fees incurred by either party in the course of reaching a separation agreement or obtaining a divorce are not deductible. Such fees paid to establish child custody or visitation rights, or to seek equalization of family assets, are similarly not deductible by either parent. 

Where, however, one former spouse has the right to receive support payments from the other, there are circumstances in which legal fees paid in connection with that right are deductible. Specifically, legal fees paid for the following purposes will be deductible by the person receiving the support payments:

• to establish the amount of support payments from their current or former spouse or common-law partner;
• to establish the amount of support payments from the legal parent of their child (who is not their current or former spouse or common-law partner) where the support is payable under the terms of a court order;
• to seek an increase in support payments;
• to defend against a reduction in support payments;
• to collect late support payments owing; or
• to request that child support payments be non-taxable.

On the payment side of the support payment/receipt equation, the situation is not nearly so favourable, as a deduction for legal fees incurred will generally not be allowed to a person paying support. More specifically, as stated in the Canada Revenue Agency publication on the subject, a payer of support “cannot deduct legal and accounting fees incurred to establish, negotiate, contest, reduce or terminate the amount of support payments”.

Finally, where the Canada Revenue Agency reviews or challenges income amounts, deductions, or credits reported or claimed by a taxpayer for a tax year, any fees (which in this case would also include accounting fees) paid for advice or assistance in dealing with the CRA’s review, assessment, or reassessment, or in objecting to that assessment or reassessment, can be deducted by the taxpayer.  A deduction can similarly be claimed where the taxpayer incurs such fees in relation to a dispute involving Employment Insurance, the Canada Pension Plan, or the Québec Pension Plan.

The final hurdle to be faced by a taxpayer seeking to claim a deduction for legal fees incurred is figuring out where on their income tax return such a deduction can be claimed. Unlike many other expenditures for which a tax deduction is available, there is no single line on the federal income tax return specifically for the claiming of a deduction for legal fees. Rather, there are several such lines, and which line the taxpayer should use in claiming a deduction depends on the purpose for which the legal expenses were incurred. The rules are as follows:

• Line 22100 – claiming a deduction for legal expenses incurred by a recipient of support payments;
• Line 22900 – claiming a deduction for legal expenses incurred to collect salary or wages owed to the taxpayer;
• Line 23200 – claiming a deduction for legal expenses and/or accounting fees incurred to respond to a CRA assessment or reassessment of income, deductions, or credits, or entitlement under the Canada Pension Plan, the Québec Pension Plan, or Employment Insurance program;
• Line 23200 – claiming a deduction for legal fees incurred to collect or establish a right to a retiring allowance or pension benefit.

Detailed information on the often confusing rules which govern the deduction of legal fees incurred is available on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-23200-other-deductions.html#toc2.

In 1966, Canadian workers began contributing for the first time to a new government sponsored retirement income plan – the Canada Pension Plan. Today, 60 years later, retirement for most Canadians bears little or no resemblance to the way retirement looked in 1966. At that time, retirement followed a predictable path – nearly all workers left a full-time position to retire completely at age 65, at which time they often started to receive monthly payments from an employer-sponsored pension plan.

In 1966, Canadian workers began contributing for the first time to a new government sponsored retirement income plan – the Canada Pension Plan. Today, 60 years later, retirement for most Canadians bears little or no resemblance to the way retirement looked in 1966. At that time, retirement followed a predictable path – nearly all workers left a full-time position to retire completely at age 65, at which time they often started to receive monthly payments from an employer-sponsored pension plan.

Retirement has changed in at least three important ways since then. First, retirement is no longer one-size-fits-all, and retirement plans (and the age at which retirement starts) are now different for almost every individual. Second, retirement is now more often a process than an event. Rather than complete retirement from full-time employment at age 65, Canadians often gradually reduce their work commitment from full-time to part-time, while others retire from a full-time position and take up part-time work in a different field. Sometimes that part-time work is done to keep busy and maintain a sense of social connection, while in other cases it’s done out of financial necessity. Finally, while most workers in 1966 could look forward to regular payments from an employer-sponsored pension plan, that hasn’t been the reality for Canadian workers (especially private sector workers) for some time.

When retirement for most Canadians changes, retirement income systems and plans must inevitably change to meet the evolving needs of retirees – and they have. The increasingly flexible nature of retirement plans is reflected in changes made over the past fifteen years to the Canada Pension Plan.

Every Canadian worker (employed or self-employed) who earns more than a threshold amount of income during the year (that amount is currently $3,500) must contribute to the Canada Pension Plan, starting at age 18 and continuing throughout their working life, or until the month in which they turn 70. The amount of contributions made is based on the individual’s income for the year, and total contributions made will determine the amount of CPP retirement benefit for which the individual will be eligible.

It’s possible to begin receiving CPP retirement benefits as early as age 60 and as late as age 70, with the amount of benefit increasing with each month that receipt of benefits is deferred past age 60. Many Canadians now choose to begin receiving their CPP retirement benefit while continuing to participate, part-time or full-time, in the work force.

At one time, beginning to receive CPP retirement benefits meant that, even for those who chose to remain in the work force, no further CPP contributions were allowed. In 2012 that changed, with the introduction of the CPP Post-Retirement Benefit, or PRB. The availability of the PRB means that those who are aged 65 to 69 and continue to work while receiving CPP retirement benefits must decide whether or not to continue making CPP contributions. Such individuals who make the choice to continue to contribute to the Canada Pension Plan will see an increase, as the result of the PRB, in the amount of CPP retirement benefit they receive each month for the remainder of their lives.

The rules governing the availability of the PRB differ, depending on the age of the taxpayer. In a nutshell, an individual who is receiving the CPP retirement benefit and who continues to work will be subject to the following rules:

• Individuals who are 60 to 64 years of age and continue to work are required to continue making CPP contributions.
• Individuals who are 65 to 69 years of age and continue to work can choose not to make CPP contributions. To stop contributing, such an individual must fill out form https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/cpt30.html. A copy of that form must be given to the individual’s employer and the original sent to the Canada Revenue Agency (CRA). An individual who has more than one employer must make the same choice (to continue to contribute or to cease contributions) for all employers and must provide a copy of the CPT30 form to each employer.
  
  A decision to stop contributing can be changed, and contributions resumed, but only one such change can be made per calendar year. To make that change, the individual must complete section D of CRA form https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/cpt30.html, give one copy of the form to their employer(s), and send the original to the CRA.
• Individuals who are over the age of 69 and are still working cannot contribute to the CPP.

For individuals aged 65 to 69 who are still working, a decision on whether to continue making CPP contributions is, essentially, a cost/benefit analysis – each individual must determine whether the cost of making such contributions is justified by the increase in CPP retirement benefits which will result. To make that calculation, it’s necessary to start by knowing how much continuing contributions will cost.

For 2026, the rules for contributions to the CPP are as follows.

• Each employee contributes first tier contributions of 5.95% of income between $3,500 and $74,600, to a maximum first tier CPP contribution amount of $4,230.45.
• Individuals who have employment or self-employment income of more than $74,600 will be required to pay additional CPP contribution amounts of 4% of income between $74,600 and $85,000, with the maximum second tier contribution amount (for employees) being $416.00.
• For self-employed individuals (who must pay both the employer and employee portions of CPP contributions), the maximum first tier CPP contribution in 2026 will be $8,460.90 and the maximum second tier contribution will be $832. 

For individuals who are trying to decide whether to continue contributing to the CPP, there are some general rules of thumb which can be useful in making that determination. Generally speaking, continuing to contribute makes the most sense for younger individuals whose current CPP retirement pension is significantly less than the maximum allowable benefit (which, in 2026, is $1,507.65 per month), as making such contributions will mean an increase in the individual’s CPP retirement benefit each month for the rest of their life. Conversely, for individuals who are already receiving the maximum CPP retirement benefit, or even close to it, there is likely little or no benefit to be derived from continuing to contribute. Self-employed individuals will need to factor in the reality that they will be required to pay both the employer and employee contribution amounts. And, finally, those whose income is more than $74,600 in 2026 will need to consider the additional cost of making second tier CPP contributions.

It can seem that analyzing the various factors which go into a decision on whether the continue to make CPP contributions requires the skills of an actuary. There is, however, a federal government resource which is provided free of charge and enables users to obtain an estimate of the amount of PRB which they can expect to receive in each subsequent year if they continue to contribute to the CPP. That Retirement Income Calculator (which is, in fact, a useful tool for anyone engaged in planning for retirement income) can be found on the federal government website at  https://srv111.services.gc.ca/generalinfo/index.

Where an individual aged 65 to 69 decides that continuing to make CPP contributions makes sense in their circumstances, and the required forms are completed and submitted, the amount of any CPP post-retirement benefit earned will automatically be calculated by the federal government (no application is required), and the individual will be advised of any increase in the monthly CPP retirement benefit each year. The PRB will be paid to that individual automatically the year after the contributions are made, effective January 1 of that second year. Since the federal government doesn’t have all of the information needed to make such calculations until T4s and T4 summaries are filed by the employer by the end of February, the first PRB payment is usually made in a lump sum amount, in the month of April. That lump sum amount represents the PRB payable from January to April. Thereafter, the PRB is paid monthly and combined with the individual’s usual CPP retirement benefit in a single payment.

More information on the PRB generally is available on the same website at https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-post-retirement.html.

Graduation from high school and the start of post-secondary education is an exciting time for both students and their families. Students who are beginning post-secondary education this fall are likely focused on choosing courses for the upcoming fall semester, getting a place in residence or finding a place off-campus, and generally anticipating the independence of life away from their family for the first time.

Graduation from high school and the start of post-secondary education is an exciting time for both students and their families. Students who are beginning post-secondary education this fall are likely focused on choosing courses for the upcoming fall semester, getting a place in residence or finding a place off-campus, and generally anticipating the independence of life away from their family for the first time.

Parents, while undoubtedly proud of and excited for their recent graduate, are undoubtedly also contemplating the cost of all of this, because the hard reality is that all choices and decisions around post-secondary education come with a price tag – sometimes a very steep one. Regardless of geographic location, program choices, or housing arrangements, post-secondary learning is expensive. There will be tuition bills, of course, but also the need to find (and pay for) safe and convenient housing in what is, in many college or university locations, a very tight and very expensive rental market. Those who choose to live in a university residence and are able to secure a place in residence will also face bills for that accommodation and, often, for a meal plan.

Fortunately for students (and the parents who are likely footing much of the bill), there are tax credits, deductions, and benefits which can be claimed to help offset such costs. While some such tax credits have been eliminated in recent years, there are still post-secondary education costs for which an offsetting tax credit can be claimed. The most significant credits available to post-secondary students (or their spouses, parents, or grandparents) for the upcoming 2026-27 academic year are outlined below.

Tuition fees

A federal tax credit continues to be available for the single largest cost associated with post-secondary education – the cost of tuition. Any student who incurs more than $100 in tuition costs at an eligible post-secondary institution (which would include most Canadian universities and colleges) can claim a non-refundable federal tax credit equal to 14% of such tuition costs. Many of the provinces and territories also provide students with an equivalent provincial or territorial credit, with the rate of such credit differing by jurisdiction.

The charges imposed on post-secondary students under the heading of “tuition” include a myriad of costs which may differ, depending on the particular program or institution, and not all of those costs will qualify as “tuition” for purposes of the tuition tax credit. The following specific amounts do, however, constitute eligible tuition fees for purposes of that tax credit:

• admission fees;
• charges for use of library or laboratory facilities;
• exemption fees;
• examination fees (including re-reading charges) that are integral to a program of study;
• application fees (but only if the student subsequently enrolls in the institution);
• confirmation fees;
• charges for a certificate, diploma, or degree;
• membership or seminar fees that are specifically related to an academic program and its administration;
• mandatory computer service fees; and
• academic fees.

Charges imposed for the following items, however, do not constitute tuition fees for purposes of the tuition tax credit:

• extracurricular student social activities;
• medical expenses;
• transportation and parking;
• board and lodging;
• goods of enduring value that are to be retained by students (such as a microscope, uniform, gown, or computer);
• initiation fees or entrance fees to professional organizations, including examination fees or other fees (such as evaluation fees) that are not integral to a program of study at an eligible educational institution;
• administrative penalties incurred when a student withdraws from a program or an institution;
• the cost of books (other than books, compact disks, or similar material included in the cost of a correspondence course given by a Canadian educational institution); and
• courses taken for purposes of academic upgrading to allow entry into a university or college program, as such courses are not considered to be at the post-secondary school level.

Certain other ancillary fees and charges, such as health services fees and athletic fees, may also count as eligible tuition fees. However, a tuition tax credit can be claimed only for up to $250 in such fees and charges, unless the fees are required to be paid by all full-time students or by all part-time students.

At both the federal and provincial levels, the tuition tax credit is a non-refundable one, meaning that it can reduce or eliminate tax otherwise payable, but cannot create or increase a tax refund. Where, as is often the case, a student doesn’t have tax payable for the year because their income isn’t high enough (or doesn’t have sufficient tax payable to use up any available tuition tax credit), credits earned can be carried forward and claimed by the student in any future tax year or transferred (within limits) in the current year to be claimed by a spouse, parent, or grandparent.

Rent, food, and other personal and living expenses

Unfortunately, although housing and food costs will take up a very big chunk of each student’s budget, there is not (and never has been) a tax deduction or credit which is claimable for such costs. In all cases, living costs incurred by a post-secondary student (whether on campus or off) are characterized as personal and living expenses, for which no tax deduction or credit is allowed.

Student debt

Most post-secondary students in Canada must incur some amount of debt (usually from a federal or provincial student loan program) in order to complete their education, and repayment of such debt is typically not required until after graduation. Once repayment starts, a 14% federal tax credit can be claimed for the amount of interest paid during the year on government student loan debt, and the credit claimable for such interest amounts paid can be carried forward and claimed in any of the five subsequent tax years. And while other types of credits related to post-secondary education (like the tuition tax credit) can be transferred to and claimed by other family members, the student loan interest tax credit can be claimed only by the student – no transfer of the credit is allowed.

Students who are still in school and arranging for loans to finance their education should be mindful of the rules which govern that student loan interest tax credit, since decisions made while still in school with respect to how post-secondary education will be financed can have tax consequences down the road, after graduation. That’s because while interest paid on a qualifying student loan is eligible for the credit, only some types of student borrowing will qualify for that credit. Specifically, only interest paid on government-sponsored (federal or provincial) student loans will qualify for the credit. Interest paid on loans of any kind from any financial institution will not.

It’s not uncommon (especially for students in professional programs, like law or medicine) to be offered lines of credit by a financial institution, often at advantageous or preferential interest rates. As well, financial institutions sometimes offer, once a student has graduated and begun to repay a government-sponsored student loan, to consolidate that student loan with other kinds of debt, also at advantageous interest rates. However, it should be kept in mind that interest paid on that line of credit (or any other kind of borrowing from a financial institution which is used to finance education costs) will never be eligible for the student loan interest tax credit.

As explained in the Canada Revenue Agency publication on the subject: “The interest claimed must only be interest on the student loan and not on any other type of loan, or paid on a student loan that has been combined with any other loan. If you renegotiated your student loan with a bank or another financial institution, or included it in an arrangement to consolidate your loans, you cannot claim this interest amount.”  In other words, where a government student loan is combined with other debt and consolidated into a borrowing of any kind from a financial institution, the interest on that government student loan is no longer eligible for the student loan interest tax credit.

Students who are contemplating borrowing from a financial institution rather than getting a government student loan (or considering a consolidation loan which incorporates that government student loan amount) must remember, in evaluating the benefit of any preferential interest rate offered by a financial institution, to take into account the loss of the student loan interest tax credit on that borrowing in future years.

Other credits and deductions

The tax credits outlined above are those which are specific to the particular costs incurred by students enrolled in post-secondary education. There are, however, other credits and deductions which, while not specifically education-related, are frequently claimed by post-secondary students (for instance, a deduction claimed for moving costs). The Canada Revenue Agency publishes a very detailed and comprehensive guide which summarizes most of the rules around income, deductions, and tax credits which are of relevance to post-secondary students. The current version of that guide (P105 Students and Income Tax, which was last updated in December 2025) can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/p105.html.

One’s 71^st birthday is a very consequential event when it comes to retirement planning for Canadian taxpayers, and it’s an event which will be experienced by hundreds of thousands of Canadians during 2026.

One’s 71^st birthday is a very consequential event when it comes to retirement planning for Canadian taxpayers, and it’s an event which will be experienced by hundreds of thousands of Canadians during 2026.  

While saving for retirement through an employer-sponsored pension plan used to be the “norm”, that hasn’t been the reality for most working Canadians for some time. Most Canadians, certainly those who work in the private sector, have for decades been saving for retirement through contributions to a registered retirement savings plan (RRSP). And, regardless of the amount saved or whether the planholder is retired, partly retired, or still in the full-time work force, every RRSP holder who reaches the age of 71 this year will be required, by the end of 2026, to make a decision on how to structure and invest their retirement income funds for the remainder of their lives.

The need to make that decision arises from the rule that all taxpayers who hold funds within an RRSP are required to collapse that RRSP by the end of the calendar year in which they turn 71 years of age – no exceptions, and no extensions. It’s a hugely consequential decision, as the course of action chosen will affect the individual’s income for the remainder of their life and, in some cases, actions taken cannot be undone.

While the actual decision is a complex one, there are actually only three options available to a taxpayer who must collapse an RRSP. They are as follows:

• collapse the RRSP and include all of the proceeds in income for that year;
• collapse the RRSP and transfer all proceeds to a registered retirement income fund (RRIF); and/or
• collapse the RRSP and purchase an annuity with the proceeds. 

It’s not hard to see that the first option doesn’t have much to recommend it. Collapsing an RRSP without transferring the balance to a RRIF or using that amount to purchase an annuity means that every dollar in the RRSP will be treated as taxable income for that year. In some cases, where a substantial six figure amount has been saved in the RRSP, that can mean losing nearly half of the RRSP proceeds to income tax.  And, while any balance of proceeds left can then be invested, tax will be payable on all investment income subsequently earned.

As a practical matter, then, the choices come down to two: a RRIF or an annuity. And, as is the case with most tax and financial planning decisions, the best choice will be driven by one’s personal financial and family circumstances, risk tolerance, cost of living, and the availability of other sources of income to meet such living costs.

The annuity route has the great advantages of simplicity and certainty. In exchange for a lump sum amount paid by the taxpayer, the annuity issuer agrees to pay that taxpayer a specific sum of money, usually once a month, for the remainder of their life. Annuities can also provide a guarantee period, in which the annuity payments continue for a specified time period (five years, 10 years) even if the taxpayer dies during that time. Finally, annuities can be set up as joint annuities, in which annuity payments will continue until the death of the last annuitant – such joint annuities are most often purchased by spouses. Regardless of how the annuity is structured, the amount of monthly income which can be received is determined by the amount used to purchase the annuity, the gender and, especially, the age of the annuity purchaser(s), and the prevailing interest rates at the time the annuity is purchased.

For taxpayers whose primary objective is to obtain a guaranteed life-long income stream without the responsibility of making any investment decisions or the need to take any investment risk, an annuity can be an attractive option. There are, however, some potential downsides to be considered. First, an annuity arrangement can never be reversed. Once the taxpayer has signed the annuity contract and transferred the funds, they are locked into that annuity arrangement for the remainder of their life, regardless of any change in circumstances that might mean an annuity is no longer suitable. Second, unless the annuity contract includes a guarantee period, there is no way of knowing how many payments the taxpayer will receive. If they die within a short period of time after the annuity is put in place, there is usually no refund of amounts invested – once the initial transfer is made at the time the annuity is purchased, all funds transferred belong to the annuity company. Third, most annuity payment schedules do not keep up with inflation – while it is possible to obtain an annuity in which payments are indexed, having that feature will mean a substantially lower monthly payout amount. Finally, where the amount paid to obtain the annuity represents most or all of the taxpayer’s assets, entering into the annuity arrangement means that the taxpayer will not be leaving an estate for their heirs.

The second option open to taxpayers is to collapse the RRSP and transfer the entire balance to a registered retirement income fund, or RRIF. A RRIF operates in much the same way as an RRSP, with two major differences. First, it’s not possible to contribute funds to a RRIF. Second, the taxpayer is required to withdraw an amount from their RRIF (and to pay tax on that amount) each year. That minimum withdrawal amount is a percentage of the outstanding balance, with that percentage figure determined by the taxpayer’s age at the beginning of the year. For RRIF holders who are 71 at the start of the year, the required withdrawal percentage is 5.28% – and it increases in each subsequent year. While the taxpayer can always withdraw more in a year (and pay tax on that withdrawal), they cannot withdraw less than the minimum required withdrawal for their age group.

Where a taxpayer holds savings in a RRIF, they can invest those funds in the same investment vehicles that were used while the funds were held in an RRSP. And, as with an RRSP, investment income earned by funds held inside a RRIF are not taxed as they are earned. While the ability to continue holding investments that can grow on a tax-sheltered basis provides the taxpayer with a lot of flexibility, that flexibility has a price in the form of investment risk. As is the case with all investments, investments held within a RRIF can increase in value – or decrease – and the taxpayer carries the entire investment risk. When things go the way every investor wants them to, investment income is earned while the taxpayer’s underlying capital is maintained, but that result is never guaranteed.

On the death of a RRIF annuitant, any funds remaining in the RRIF can be transferred to a RRIF of the surviving spouse without payment of tax. Where there is no surviving spouse, the balance of funds in the RRIF will be treated, for tax purposes, as income to the RRIF annuitant in the year of death, and must be reported as income on the tax return for that year.

While the above discussion of RRIFs versus annuities focuses on the benefits and downsides of each, it’s not necessary, and in many cases not advisable, to limit the options to an either/or choice. It is possible to structure a retirement income plan to provide, to some extent, for both the seemingly irreconcilable goals of lifetime income security and capital (and estate) growth. Combining the two alternatives – annuity and RRIF – either now or in the future can go a long way toward satisfying both objectives.

For everyone, whether in retirement or not, spending is a combination of non-discretionary and discretionary items. The first category is made up mostly of expenditures for income tax, housing (whether rent or the costs of owing a house – even where the mortgage has been paid off, costs like property taxes and utilities must still be paid), food, insurance costs, and (especially for older Canadians) the cost of out-of-pocket medical expenses. The second category, that of discretionary expenses, includes entertainment, travel, and the cost of any hobbies or interests pursued. A strategy which utilizes a portion of RRSP savings to create a secure lifelong income stream to cover non-discretionary costs can help to remove the worry of outliving one’s money, while the balance of savings can be invested for growth and to provide the income to be used for non-discretionary spending.

Such a secure income stream to cover non-discretionary expenses can, of course, be created by the purchase of an annuity. As well, although most taxpayers don’t think of them in that way, the Canada Pension Plan and Old Age Security program have many of the attributes of an annuity, with the added benefit that both are indexed to inflation. By age 71, all taxpayers who are eligible for CPP and OAS will have begun receiving those monthly benefits. Consequently, in making the RRIF/annuity decision at that age, taxpayers should include in their calculations the extent to which CPP and OAS benefits will pay for their non-discretionary living costs.

As of July 2026, the maximum OAS benefit for most Canadians (specifically, those who have lived in Canada for at least 40 years after the age of 18) is about $752 ($827 for those aged 75 and older) per month. The amount of CPP benefits receivable by the taxpayer will vary depending on their work and contribution history, but for 2026, the maximum CPP retirement benefit which can be received at age 65 is $1,508. As a result, a single taxpayer who receives maximum CPP and OAS benefits at age 65 will have $27,120 in annual income ($2,260 per month). And, for a married couple, of course, the total annual income received from CPP and OAS can be about $54,240 annually, or $4,520 per month. While $27,000 a year isn’t usually enough to provide a comfortable retirement, for those who go into retirement in reasonable financial shape – meaning, generally, without any debt – it can go a long way toward meeting non-discretionary living costs. In other words, most Canadians who are facing the annuity versus RRIF decision already have a source of income which is both guaranteed for their lifetime and is indexed to inflation. Taxpayers who are considering the purchase of an annuity to create the income stream required to cover non-discretionary expenses should first determine how much of those expenses can already be met by the combination of their (and their spouse’s) CPP and OAS benefits. The amount of any needed annuity purchase can then be set to cover off any shortfall.

While the options available to a taxpayer at age 71 with respect to the structuring of future retirement income are relatively straightforward, the number of factors to be considered in assessing those options and making that decision are not. All of that makes for a situation in which getting independent professional financial advice on the right mix of choices and investments is a very good strategy.

By the time summer arrives, nearly all Canadians have filed their income tax returns for the previous year, have received a Notice of Assessment from the tax authorities with respect to that return, and have either spent their tax refund or, more grudgingly, paid any balance of tax owing.

By the time summer arrives, nearly all Canadians have filed their income tax returns for the previous year, have received a Notice of Assessment from the tax authorities with respect to that return, and have either spent their tax refund or, more grudgingly, paid any balance of tax owing.

It’s a surprise, therefore, when unexpected mail arrives from the Canada Revenue Agency (usually in late July or early August), and the information in that mail will likely be both unfamiliar and unwelcome. Specifically, the enclosed Instalment Reminder form will advise the recipient that they are advised to make instalment payments of income tax on September 15 and December 15 of 2026 – and will helpfully identify the amounts which should be paid on each date.

No one particularly likes receiving unexpected mail from the tax authorities, and correspondence which suggests that the recipient should be making payments of income tax for 2026 to the CRA during the year (instead of when they file the return for 2026 in April 2027) is likely to be both perplexing and somewhat alarming. It’s fair to say that most Canadians aren’t familiar with the payment of income tax by instalment payments, and are therefore at a loss to know how to proceed the first time they receive an Instalment Reminder.

The reason that the instalment payment system is unfamiliar to most Canadians is that most of us pay income taxes during our working lives through a different system. Every Canadian employee has tax automatically deducted from their paycheque (“at source”), before that paycheque is issued, and that tax is remitted by the employer to the CRA on the employee’s behalf. Such deductions and remittances accrue to the employee’s benefit, and they are credited with those remittances when filing the annual tax return for that year. It’s an efficient system, but it’s also one which is largely invisible to the employee, and certainly one which operates without the need for the employee to take any steps on their own.

Where an individual is no longer an employee – for instance, they start a business and becomes self-employed, or retire and begins to receive retirement income from various government and non-government sources – such deductions and remittances are no longer automatically made. However, Canadian tax rules provide that, where the amount of tax owed when a return is filed by the taxpayer is more than $3,000 ($1,800 for Québec residents) in the current (2026) year and either of the two previous (2024 or 2025) years, that taxpayer may be subject to the requirement to pay income tax by instalments.

The reason that first instalment reminders are issued in late July or early August has to do with the schedule on which Canadians file their tax returns. The amount of tax payable on filing for the immediately preceding year can’t be known until the tax return for that year has been filed and assessed, and the tax return filing deadline for individuals is April 30 (or June 15 for self-employed taxpayers and their spouses). Consequently, by the end of June, the CRA will have the information needed to determine whether a particular taxpayer should receive a first instalment reminder for the current year

Taxpayers who receive that first Instalment Reminder in July may also be puzzled by the fact that it is a “Reminder” and not a “Requirement” to pay. The reason for that is that those who receive it are not actually required by law to make instalment payments of tax. There are, in fact, three options open to the taxpayer who receives an Instalment Reminder.

First, the taxpayer can pay the amounts specified on the Reminder, by the respective due dates of September 15 and December 15. A taxpayer who does so can be certain that they will not have to pay any interest or penalty charges even if they do have to pay an additional amount on filing in the spring of 2027. If the instalments paid turn out to be more than the taxpayer’s tax liability for 2026, they will of course receive a refund on filing.

Second, the taxpayer can make instalment payments based on the total amount of tax which was owed and paid for the 2025 tax year (including any balance that was owed on filing). If a taxpayer’s income has not changed between 2025 and 2026 and their available deductions and credits remain the same, the likelihood is that total tax liability for 2026 will be slightly less than it was in 2025, owing to the indexation of tax brackets and tax credit amounts, as well as a slight reduction in federal individual income tax rates for 2026.

Third, the taxpayer can estimate the amount of tax which they will actually owe for  2026 and can pay instalments based on that estimate. Where a taxpayer’s income has dropped from 2025 to 2026 and there will consequently be a reduction in tax payable, this option may be worth considering. Taxpayers who wish to pursue this approach can obtain the information needed to estimate current year taxes (federal and provincial tax brackets and rates) on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html#federal.

Where taxpayers choose to use option 2 or 3 rather than paying the amounts set out in the Instalment Reminder, they should be aware that the total amount to be paid is not divided equally between the September and December instalment payments. Rather, 75% of the total instalment amount for 2026 should be paid in the September instalment and the remaining 25% paid in the December instalment payment.

All of this may seem like a lot of research and calculation effort, especially when one considers that many Canadians don’t even prepare their own tax returns. And those who don’t want to be bothered with the intricacies of tax calculations can pay the amounts set out in the Instalment Reminder, secure in the knowledge that they will not incur any penalty or interest charges and that, should those amounts ultimately represent an overpayment of taxes, that overpayment will be refunded when the return for 2026 is filed next spring.

Once they have resigned themselves to the realities of the tax instalment system, the next question that most taxpayers have is how such payments can be made. The options open to taxpayers in that regard are helpfully outlined on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/making-payments-individuals/paying-your-income-tax-instalments/you-pay-your-instalments.html.

By the time summer arrives, the deadline for filing an individual income tax return for the previous year has come and gone for all individual Canadians. The majority of taxpayers were required to file that return for 2025 on or before April 30, 2026, while self-employed individuals (and their spouses) had until June 15, 2026 to complete that filing obligation. And, given the time frame during which the Canada Revenue Agency processes such returns and issues a Notice of Assessment, it’s likely that most if not all of those taxpayers have received their Notice of Assessment and concluded that their  annual filing and payment obligations are done and behind them for another year.

By the time summer arrives, the deadline for filing an individual income tax return for the previous year has come and gone for all individual Canadians. The majority of taxpayers were required to file that return for 2025 on or before April 30, 2026, while self-employed individuals (and their spouses) had until June 15, 2026 to complete that filing obligation. And, given the time frame during which the Canada Revenue Agency processes such returns and issues a Notice of Assessment, it’s likely that most if not all of those taxpayers have received their Notice of Assessment and concluded that their  annual filing and payment obligations are done and behind them for another year.

For most taxpayers it is therefore surprising to receive a communication from the CRA in mid-summer, and more than a little unsettling to find out that the Agency has some further questions about the tax return that the taxpayer thought was already completed. Notwithstanding, that’s an experience that millions of taxpayers will have over the next few weeks and months.

Between February 6th and June 14 of this year, the Canada Revenue Agency received and processed just under 32 million individual income tax returns filed for the 2025 tax year, and issued a Notice of Assessment in respect of each one of those returns. The sheer volume of returns and the processing turnaround timelines mean that the CRA does not (and could not possibly) do a manual review of the information provided in a return prior to issuing the Notice of Assessment. Rather, returns are scanned by the Agency’s computer system and a Notice of Assessment is then issued.

In addition, the CRA has, for many years, been successful in encouraging taxpayers to fulfill their filing obligations online, through one of the Agency’s electronic filing services. This year, just under 30 million (or 93%) of individual returns for 2025 were filed by electronic means. While e-filing means that the turnaround for processing of returns is much quicker, there is, by definition, no “paper trail” involved.

The Canadian tax system has always been what is termed a “self-assessing” system, in which taxpayers report income earned and claim deductions and credits to which they believe they are entitled. Prior to the advent of e-filing there were means by which the CRA could easily verify claims made by taxpayers. Where returns were paper-filed, taxpayers were usually required to include receipts or other documentation to prove their claims, whatever those claims were for. For the 94% of returns which were filed this year by electronic means, no such paper trail exists. Consequently, the potential exists for misrepresentation of such claims (or simple reporting errors) on a large scale.

The CRA’s response to that risk is to conduct a wide range of review programs (there are, in fact, no fewer than eight separate tax return review programs utilized by the Agency), to ensure that information reported on each return was accurate and claims made for deductions and credits were justified. Some review programs are carried out before a Notice of Assessment is issued for the taxpayer’s return, and others after that Notice of Assessment has been issued and sent to the taxpayer. Regardless of the timing and the review program under which the review is carried out, in all cases the purpose of the review is to ensure that income amounts reported are complete and accurate and that deduction and tax credit claims made on the return can be verified by receipts or other documentation.

Being selected for review under any of the CRA’s review programs means, for the individual taxpayer, the possibility of receiving unexpected correspondence, or a telephone call, from the CRA. Receiving such correspondence or such a call from the tax authorities is almost guaranteed to worry the recipient taxpayer, who may immediately conclude that they have done something very wrong and are facing a big tax bill. However, in the vast majority of cases, the contact is just a routine part of the Agency’s processing review mandate.

Where the initial contact from the CRA to the taxpayer is done by telephone, it’s important that the taxpayer verify the identity of the person claiming to be a representative of the Agency. As virtually everyone knows by now, fraudulent or “scam” calls purporting to be from the CRA have become commonplace. To assist taxpayers in confirming that any telephone contact received is a legitimate one, the CRA has provided information on how to respond to such a call, and that information can be found on the CRA website at Verify it's the CRA calling - Scams and fraud - CRA - Canada.ca.

Most taxpayers, of course, are not concerned so much with the kind of program or programs under which they are contacted as they are with why their return was singled out for review or follow-up, and there are a number of reasons why that might have occurred.

One of the review programs administered by the CRA is the “Matching Program”, in which information reported on the taxpayer’s return (both income and deductions) is compared to information provided to the CRA by third-party sources (like T4s filed by employers or T5s filed by banks or other financial institutions). Where information provided by such a third party does not agree with the figures reported by the taxpayer on their return, the CRA is likely to want an explanation of the discrepancy.

As well, Canada’s tax laws are complex and, over the years, there are areas in which the CRA has determined that taxpayers are more likely to make errors on their return. Consequently, a return which includes claims in those areas (like dependant tax credit claims and claims for medical expenses, moving expenses, or tuition tax credits) may have an increased chance of being reviewed. Where there are deductions or credits claimed by the taxpayer which are significantly different or greater than those claimed in previous returns, that may attract the CRA’s attention. And, if the taxpayer’s return has been reviewed in previous years and, especially if an adjustment was made following that review, subsequent reviews may be more likely. Finally, many returns are picked for the processing review programs simply on the basis of random selection.  

Regardless of the reason for the follow-up, the process is the same. Taxpayers whose returns are selected for review will be contacted by the CRA, usually by letter, identifying the deduction or credit for which the CRA wants documentation or the income or deduction amount about which a discrepancy seems to exist. The taxpayer will be given a reasonable period of time – usually a few weeks from the date of the letter – in which to respond to the CRA’s request. That response should be in writing, attaching, if needed, the receipts or other documentation which the CRA has requested. All correspondence from the CRA under its review programs will include a reference number, which is usually found in the top right-hand corner of the CRA’s letter. That number is the means by which the CRA tracks the particular inquiry, and should be included in the response sent to the Agency. It’s important to remember, as well, that it’s the taxpayer’s responsibility to provide proof, where requested, of any claims made on a return. Where a taxpayer does not respond to a CRA request or does not provide such proof, the Agency will proceed on the basis that the requested verification or proof does not exist and will assess or reassess accordingly.

Taxpayers who have registered for the CRA’s online tax program My Account (or whose representative is similarly registered for the Agency’s Represent a Client online service) can usually submit required documentation electronically. More information on how to do so can be found on the CRA website at Submitting documents online – Pre-assessment Review, Processing Review, Request Verification and Matching Programs - Canada.ca.

Whatever the reason a particular return was selected for review by the CRA, one thing is certain. A prompt response to the CRA’s enquiry, providing the Agency with the information or documentation requested, will, in the vast majority of cases, bring the matter to a speedy conclusion, to the satisfaction of both the Agency and the taxpayer. Detailed information on the return review process can be found on the CRA website at Review of your tax return by the CRA - Canada.ca.

While the Canadian housing market overall is down significantly from its peak in early 2022, houses continue to be bought and sold, and each such purchase and sale means a move for multiple households. The downturn in residential real estate prices has, in some instances, allowed first-time homebuyers to get into the market sooner than they might have expected. In other cases, however, it has meant that current homeowners who purchased during the pandemic, when prices were higher and interest rates were at historic lows, are finding the carrying costs for their mortgage at renewal to be unsustainable. In such cases, a sale of the house can be their best (or only) option. And, finally, every spring university students make the semi-annual trek from their university residences or apartments back to the family home for the summer, and then back to school again.

While the Canadian housing market overall is down significantly from its peak in early 2022, houses continue to be bought and sold, and each such purchase and sale means a move for multiple households. The downturn in residential real estate prices has, in some instances, allowed first-time homebuyers to get into the market sooner than they might have expected. In other cases, however, it has meant that current homeowners who purchased during the pandemic, when prices were higher and interest rates were at historic lows, are finding the carrying costs for their mortgage at renewal to be unsustainable. In such cases, a sale of the house can be their best (or only) option. And, finally, every spring university students make the semi-annual trek from their university residences or apartments back to the family home for the summer, and then back to school again.

No matter the reasons or circumstances for the move or the distance to the new location, all moves have two things in common – stress and cost. Even where the move is a desired one, moving inevitably means upheaval of one’s life, and the costs involved can be very significant. There is not much that can diminish the stress of moving, but the associated costs can be offset somewhat by a tax deduction which may be claimed for many of those costs.

While it’s common to the refer to the “moving expense deduction” as though it were available to all taxpayers in all circumstances, the fact is that there is actually no universally available deduction claimable for moving costs – in order to be tax deductible, such moving costs must meet specific criteria. Our tax system allows taxpayers to claim a deduction only where the move is made to get the taxpayer closer to their new place of work, whether that work is a transfer within the same company, a change in employers, or moving to run a business at the new location. Specifically, moving expenses can be deducted where the move is made to bring the taxpayer at least 40 kilometres closer to their new place of work. That requirement is satisfied where, for instance, a taxpayer moves from Halifax to Toronto to take that new job. It’s also met where a taxpayer is transferred by their employer to another job in a different location and the taxpayer’s move will bring them at least 40 kilometres closer to the new work location. It’s not met where an individual or family move up the property ladder by selling and purchasing a new home in the same town or city.

As well, it’s not actually necessary to be a homeowner in order to claim moving expenses. The list of moving-related expenses which may be deducted is basically the same for everyone – homeowner or tenant – who meets the 40-kilometre requirement. Students who move to take a summer job (even if that move is back to the family home) can also make a claim for moving expenses incurred where the overriding 40-kilometre requirement is met.

It's important to remember, however, that even where the 40-kilometre requirement is met, moving costs can be deducted only from income earned from employment or self-employment (business) – such costs cannot be deducted from other types of income, like investment income or employment insurance benefits.

The general rule is that a taxpayer can claim reasonable amounts that were paid for moving themself, family members, and household effects. In all cases, moving expenses can only be deducted from employment or self-employment income earned at the new location. Where the move takes place later in the year, and moving costs are significant, it’s possible that the amount of income earned at the new location in the year of the move will be less than deductible moving expenses incurred. In such instances, those expenses can be carried over and deducted from income earned at the new location in any future year.

Within the general rule, there are a number of specific inclusions, exclusions, and limitations. The following is a list of expenses which can be claimed by the taxpayer without specific dollar figure restrictions (but subject, as always, to the overriding requirement of “reasonableness”).

• travel expenses, including vehicle expenses, meals, and accommodation, to move the taxpayer and members of their household to their new residence (note that not all members of the household have to travel together or at the same time);
• transportation and storage costs (such as packing, hauling, movers, in-transit storage, and insurance) for household effects, including such items as boats and trailers;
• costs for up to 15 days for meals and temporary accommodation near the old or new residences for the taxpayer and members of the household;
• lease cancellation charges (but not rent) on the old residence;
• legal or notary fees incurred for the purchase of the new residence, together with any taxes paid for the transfer or registration of title to the new residence (excluding GST or HST); 
• the cost of selling the old residence, including advertising, notary or legal fees, real estate commissions, and any mortgage penalties paid when a mortgage is paid off before maturity; and
• the cost of changing an address on legal documents, replacing driving licences and non-commercial vehicle permits (not including insurance), and costs related to utility hook-ups and disconnections.

In a sellers’ real estate market, houses can sell almost as soon as they are put on the market. That’s not usually case right now, when it can take weeks or even months to find a buyer. When those are the circumstances, the homeowner might have to move to start that new job before the “old” house has sold. In that case, the taxpayer is entitled to deduct up to $5,000 in costs incurred for the maintenance of the old residence while it is vacant and on the market. Specifically, costs including interest, property taxes, insurance premiums, and heat and utilities expenses paid to maintain the old residence while it is vacant and efforts are being made to sell it may be deducted. If any family members are still living at the old residence, or it is being rented, no such deduction is available.

It may seem from the forgoing that virtually all moving-related costs will be deductible – however, there are some costs for which the Canada Revenue Agency (CRA) will not permit a deduction to be claimed, as follows:

• expenses for work done to make the old residence more saleable;
• any loss incurred on the sale of the old residence;
• expenses for job-hunting or house-hunting trips to another city (for example, costs to travel to job interviews or meet with real estate agents);
• expenses incurred to clean or repair a rental residence to meet the landlord’s standards;
• costs to replace such personal-use items as drapery and carpets;
• mail forwarding costs; and
• mortgage default insurance.

To claim a deduction for any eligible costs incurred, supporting receipts must be obtained. While the receipts do not have to be filed with the return on which the related deduction is claimed, they must be kept in case the CRA wants to review them.

Anyone who has ever moved knows that there are an endless number of details to be dealt with. For some types of costs, the administrative burden of keeping track of (and retaining receipts for) such moving-related expenses can be minimized by choosing instead to claim a standardized amount. Specifically, the CRA allows taxpayers to claim a fixed amount, without the need for detailed receipts, for travel and meal expenses related to a move. Using that standardized, or flat rate, method, taxpayers may claim up to $23 per meal, to a maximum of $69 per day, for each person in the household. Similarly, the taxpayer can claim a set per-kilometre amount for kilometres driven in connection with the move; the per-kilometre amount ranges from 55.5 cents for Saskatchewan to 70.5 cents for the Yukon. In all cases, it is the province or territory in which the travel begins which determines the applicable rate.

These standardized travel and meal expense rates are those which were in effect for the 2025 taxation year – the CRA will be posting the rates for 2026 on its website early in 2027, in time for the tax filing season.

Once eligibility for the moving expense deduction is established, the rules which govern the calculation of the available deduction are not complex, but they are very detailed. The best summary of those rules is found on the form used to claim such expenses – the T1-M. The current version of that form can be found on the CRA’s website at T1-M Moving Expenses Deduction - Canada.ca, and more information (including links to rates for standardized meal and travel cost claims) is available at Line 21900 – Moving expenses - Canada.ca.

Most Canadians are likely of the view, having just gone through the process of pulling together various sources of information on income and deductions and having dutifully prepared and filed an income tax return for the 2025 tax year, that they can happily put the subject of income taxes to one side for the next several months.

Most Canadians are likely of the view, having just gone through the process of pulling together various sources of information on income and deductions and having dutifully prepared and filed an income tax return for the 2025 tax year, that they can happily put the subject of income taxes to one side for the next several months.

While that’s no doubt a welcome thought, the fact is that it’s not too early to start planning with respect to 2026 income taxes: to the contrary, the earlier such planning starts, the better the outcome is likely to be.

By this point, about halfway through the tax year, most Canadians have a fairly accurate idea of how much their income for 2026 will be and know, in a general way, the kinds of deductions and credits which they will be able to claim on their return. As well, since the income earned and deductions claimed by most Canadians doesn’t vary greatly from year to year, the results obtained when the return for 2025 was assessed by the Canada Revenue Agency are quite likely to be similar to those that will follow from the filing of the 2026 return next spring.

Doing a mid-year review, instead of waiting until December (or worse, until tax filing time next spring) gives the taxpayer the chance to put into place any adjustments needed to help ensure that there are no unpleasant tax surprises when the return for 2026 is filed next spring. And, while the deadline for implementing most tax saving strategies may be December 31, it’s also the case that opportunities to make a significant difference to one’s current-year tax situation diminishes as the calendar year progresses

The results which followed the filing of the 2025 return can, in fact, alert the taxpayer to the need to pay more attention to their tax situation for 2026.  Most taxpayers hope for (and in fact do receive) a refund while others are disappointed to find out that they owe additional taxes and therefore have a tax bill (on which interest may be accumulating) to pay. While the taxpayer’s reaction to those two situations may be very different, the reality is that both such outcomes signal a need to address tax planning issues for 2026.

Where there is a tax balance owing on filing, it signals that taxes were underpaid throughout the year, and the taxpayer is required to make up that shortfall by remitting additional tax amounts owed to the CRA. Conversely, getting a tax refund is often viewed by taxpayers as receiving “free” money. That’s not the case. Where the taxpayer receives a refund, it usually means that taxes were overpaid throughout the year, thereby providing the federal government with an interest-free loan of the taxpayer’s money. All taxpayers pay income tax throughout the year, and when that system works as it should, the amounts paid accurately reflect the taxpayer’s tax liability for the year, and so there is neither a significant tax amount owed or a significant tax refund received on filing. Carrying out a mid-year review of one’s tax situation for 2026 can help ensure that result when the return for 2026 is filed with the CRA next spring.

The first step in doing that review is figuring out how much one’s tax bill for 2026 is likely to be. Where income amounts and available deductions and credits are very similar for 2025 and 2026, the amount of tax owed by the taxpayer for 2025 (a figure that can be found on Line 43500 of the Notice of Assessment) is likely to be very close to their tax liability for 2026.

Where income for 2026 is likely to be significantly greater or lower than that received in 2025 (for instance, where a taxpayer retired at the end of 2025), or the taxpayer will have significantly greater tax deduction or credit claims (for instance, a large RRSP contribution or much higher than usual medical expenses) for 2026, taxpayers can use tax return preparation software for the 2025 tax year to get an idea of how much tax will be payable for 2026. Although the tax brackets and tax credit amounts used by tax return preparation software for 2025 will differ from those in effect for 2026, those differences won’t make a significant difference to the total tax bill. If anything, using 2025 tax return software to calculate the tax bill for 2026 will result in a slight overestimate of that tax bill, owing to the indexation of tax brackets and credit amounts, as well as a decrease in the federal tax rate applied to the first income bracket for 2026.

After getting a sense of how much tax is likely to be payable for the 2026 tax year, the next step in doing a review is to determine how much income tax has already been paid to the CRA for 2026 (remembering that by this point in the year, approximately one-half of the tax bill for 2026 should already have been remitted to the CRA).

There are two ways of paying income taxes throughout the year. The majority of Canadians (including all employees) have income taxes deducted from their paycheques and remitted to the federal government on their behalf – a process known as source deductions. Taxpayers who do not have income tax deducted at source – which would include self-employed individuals and, frequently, retired taxpayers – make tax payments directly to the federal government (four times a year, in March, June, September, and December) through the tax instalment system.

Where the individual involved pays tax by instalments, the solution is simple. They can simply change the amount of remaining instalment payments to be made in 2026 so that the total instalment payments made over the course of this year accurately reflect the total tax payable for the year.

The situation is a little more complex for employees, or anyone who has tax deducted at source. Where a taxpayer finds that source deductions being made will not be sufficient to cover their tax liability for the year (meaning a tax bill to be paid next spring) the solution is to have those source deductions increased. No one likes paying more taxes, but where taxes are owed the only choice involved is to pay them now or pay them later. Spreading out that payment over the rest of the tax year is much less painful than being hit with a large tax bill (as well as interest charges when that tax bill can’t be paid in full and on time) when the return for the year is filed next spring.

Take, for example, an employee who, after filing the return for 2025, received a bill indicating that an additional $1,000 in taxes was owed. Assuming that their income and the amount of tax deducted from their paycheque doesn’t change, it’s likely that a similar amount will be owed when the return for 2026 is filed. If that taxpayer is paid biweekly, there will be about 13 paycheques between the end of June and the end of the year. Increasing the amount of tax deducted from those paycheques by about $75 per paycheque will mean that the $1,000 in taxes owing is paid to the Canada Revenue Agency by the end of the year – thereby avoiding that large tax bill when the return for 2026 is filed in the spring of 2027.

To increase the amount of tax deducted from their paycheque, the employee needs to obtain a TD1 form for 2026, which can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/td1-personal-tax-credits-returns/td1-forms-pay-received-on-january-1-later.html. On the second page of the Form TD1, there is a section entitled “Additional tax to be deducted”, in which the employee can direct their employer to deduct additional amounts at source for income tax, and can specify the dollar amount which is to be deducted from each paycheque, on a go-forward basis.

No one particularly likes thinking about taxes, at any time of year, but ignoring the issue definitely won’t make it go away. The investment of a few hours of time now, and putting in place any needed adjustments, can mean greater peace of mind (and reducing the risk of facing a large tax bill) when the return for 2026 is completed and filed next spring.

It’s no secret that Canadian households have, over the past few months and years, been subjected to a series of financial and economic “hits” which have left many such households struggling to maintain their financial stability, or even to meet everyday expenses out of current income. In difficult financial times, individuals and families can and do adjust by cancelling discretionary expenses like an annual vacation, or postponing large expenditures like a new car or a bigger house. What has made the past few years so difficult is that the most significant cost increases have affected precisely the kinds of expenditures which are completely non-discretionary and cannot be deferred – specifically, the cost of food, shelter, and energy.

It’s no secret that Canadian households have, over the past few months and years, been subjected to a series of financial and economic “hits” which have left many such households struggling to maintain their financial stability, or even to meet everyday expenses out of current income. In difficult financial times, individuals and families can and do adjust by cancelling discretionary expenses like an annual vacation, or postponing large expenditures like a new car or a bigger house. What has made the past few years so difficult is that the most significant cost increases have affected precisely the kinds of expenditures which are completely non-discretionary and cannot be deferred – specifically, the cost of food, shelter, and energy.

A recent report by the Office of the Superintendent of Bankruptcy (available at Insolvency Statistics in Canada—First quarter of 2026) shows that many Canadian individuals and families have reached a point where meeting their regular financial obligations is no longer possible and they have declared personal bankruptcy. During the first quarter of 2026 (January to March), the number of personal bankruptcies in Canada rose by 8.5% when compared to the same quarter of 2025. More significantly, perhaps, is the fact that personal bankruptcies for the first quarter of 2026 are at their highest level since the same quarter in 2009 – during the 2008-09 financial crisis.

The significance of these numbers is two-fold. First, bankruptcy statistics are what is known as a “lagging indicator”, in that they represent a measure of conditions which have already occurred or are ongoing – in this case, the significant financial stress being experienced by Canadians. The fact that personal bankruptcies have increased to such a degree and that they are, by historical standards, at such a high level undoubtedly means that many other individuals and families are struggling to avoid having to take the same step.

It makes for a gloomy picture, but the fact is that a declaration of bankruptcy is the very last option to be used by individuals and families who can no longer meet their financial obligations. There are, in fact, many solutions and strategies available to individuals and families who are trying to cope with current economic conditions before a declaration of bankruptcy needs to be considered – and most of those solutions and strategies are available free of charge.

The best first step to be taken by individuals or families who are in financial difficulty is to seek out the services of a non-profit credit counselling agency. Almost every community of any size has a credit counselling agency which can assist individuals and families who are encountering such financial difficulties with strategies to help manage their situation. And, where such an agency does not exist locally, their services can usually be provided online.

Such credit counselling agencies operate on a not-for-profit basis and provide their services at little or no cost to individuals or families. Each such agency is a member of Credit Counselling Canada (to be a member of Credit Counselling Canada, an agency must be accredited and must operate only on a not-for-profit or charitable basis); a searchable listing of member agencies and their locations can be found on the Credit Counselling Canada website at https://creditcounsellingcanada.ca/locate-a-counsellor/?cc=ON. An outline of the kinds of services which are provided by such agencies is available on the same website at https://creditcounsellingcanada.ca/.

While these agencies are called credit counselling agencies, the services which they provide are much broader than the name implies. The services provided include helping clients to develop a realistic budget based on their current financial circumstances and providing advice on money management. In addition, where individuals and families are in financial difficulties, it is often the case that they take on additional debt to cope, and keeping up with that debt eventually becomes impossible, adding another layer of financial stress. Where clients are carrying unmanageable amounts of debt, credit counsellors can help to create a debt management plan (DMP). That DMP could include a voluntary agreement set up by a credit counsellor between an individual and their creditors. People who sign up for a DMP make one lump payment each month to the non-profit credit counselling agency, which then sends all of those funds directly to the individual’s creditors. In most cases, that agreement enables the individual or family to pay off debt over a longer period of time (thus improving cash flow and relieving some financial stress) and sometimes at a lower rate of interest.

It is sometimes the case that the financial circumstances of an individual or family are such that the steps which ultimately need to be taken are outside the ambit of a credit counselling agency – steps like a consumer proposal or bankruptcy. In those circumstances, the agency can provide a referral to a qualified professional in that field.

Where an individual or a family feels overwhelmed by financial stress, it’s inevitable that they will be vulnerable to approaches which promise to make their financial problems disappear. And, unfortunately, there are individuals and companies which are willing to take advantage of that vulnerability – for a fee.

The website of the Financial Consumer Agency of Canada (an agency of the federal government) at https://www.canada.ca/en/financial-consumer-agency/services/debt.html  and https://www.canada.ca/en/financial-consumer-agency/services/debt/debt-settlement-company.html contains a warning about using the services of such “debt settlement companies”, making the following points:

• Companies or agencies can’t guarantee they will solve your debt problems.
• Companies or agencies can’t quickly and easily fix your credit score.
• Companies should not (as they sometimes do) encourage you to take out a high-interest loan to pay off your debts.
• Companies and agencies may misrepresent services they offer as being part of a government program.

These warnings are based on the fact that debt settlement companies are for-profit businesses, not non-profit service providers. They collect fees from consumers who are in financial difficulty, sometimes making unrealistic commitments with respect to what they can accomplish. For instance, while such companies may promise to negotiate with creditors in order to reduce any amount owed, or the interest rate payable on existing debt, the fact is that creditors are not obliged to speak to or negotiate with a debt settlement company with respect to another person’s debts. Debt settlement companies may promise to “fix” a poor credit rating or credit report, but they have no actual power to do so. And the fees charged by such companies will almost certainly have to be paid, even when they don’t actually produce the results they promise.

Between February and May of 2026, just over 30 million individual income tax returns for the 2025 tax year were filed with the Canada Revenue Agency (CRA).  And, while each one of those returns was different with respect to income reported and deduction and credit claims made, the steps taken by the CRA after receiving each such return was the same. For each return filed, the CRA reviewed the income amounts reported and the tax deduction and credit claims made and then issued a Notice of Assessment (NOA) summarizing its conclusions with respect to the taxpayer’s tax situation for the year.

Between February and May of 2026, just over 30 million individual income tax returns for the 2025 tax year were filed with the Canada Revenue Agency (CRA).  And, while each one of those returns was different with respect to income reported and deduction and credit claims made, the steps taken by the CRA after receiving each such return was the same. For each return filed, the CRA reviewed the income amounts reported and the tax deduction and credit claims made and then issued a Notice of Assessment (NOA) summarizing its conclusions with respect to the taxpayer’s tax situation for the year.

When all goes well, the figures listed and the tax result obtained on that NOA will agree with the numbers submitted by the taxpayer on their return. In most cases (just over 17.5 million for the 2026 filing season), the filing of the return will result in a tax refund owed to the taxpayer, while for others there will be a tax balance owed.

Matters get more complicated where the CRA is not in agreement with the information provided or the claims made by the taxpayer in their return and, especially, where the CRA finds that additional tax must be paid by that taxpayer. When that happens, the taxpayer has to decide whether to dispute the decisions made by the CRA as outlined in the NOA for the year.

There are a lot of reasons why the CRA may disagree with the taxpayer, and in many cases disputing the CRA’s findings really doesn’t make sense. While the use of tax return preparation software has minimized both the risk of making a clerical or arithmetical error on the return and the possibility of the taxpayer claiming a tax credit to which they are not entitled, those errors can still occur.  And, where that has happened and the CRA correctly identifies the error, there’s really nothing to be gained by disputing their conclusions.

In many other cases, however, the taxpayer may genuinely feel that the conclusions reached by the CRA are simply incorrect. Our tax system is very complex, and the rules governing the circumstances in which a particular deduction or credit can be claimed are very detailed. In many cases, there can be a genuine question about whether, for instance, a business expense or an out-of-pocket medical cost can be claimed for tax purposes. Where the taxpayer believes that a claim made should have been allowed but was not, the next step to take is to find out why.

To do so, it’s best to contact the Agency directly for an explanation of their decision. Taxpayers can call the Individual Income Enquires line at 1-800-959-8281, where client services agents who have access to individual tax files can provide additional information about the Agency’s decision. Taxpayers who call that line should ensure that they have a copy of the NOA and/or their tax return for the year, as they will be required to provide information from that return (at a minimum, their name, social insurance number, address, and probably one or more figures from the return) before any confidential tax information can be discussed or disclosed.

Where the matter can’t be resolved to the taxpayer’s satisfaction by talking to the CRA, it’s then time to consider filing a formal dispute. Filing that dispute online through the CRA’s My Account service is, by far, the easiest way to do so. However, in order to use My Account, the taxpayer must be registered for that service.

At one time, registering for My Account was a fairly lengthy process, involving a wait for the CRA to send a security code to the taxpayer by regular mail, but changes to CRA procedures have streamlined that process. Essentially, a taxpayer who wants to register for My Account without waiting for a security code to be sent by mail needs to take a real-time picture of themself with an accepted government-issued photo identification document (for instance, a Canadian passport or driver’s licence). That photograph is then submitted online to verify the taxpayer’s identity and, once that is done, access to the taxpayer’s CRA accounts is available. Detailed information on the available options to become registered for My Account and the procedures to be followed can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/e-services/cra-login-services/register-cra-sign-in-services.html.

Taxpayers who are using My Account to file a Notice of Objection can do so by logging in online at https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/account-individuals.html. Once logged in, it’s necessary to click on the “File a formal dispute” from the listing on the left-hand side of the page. The taxpayer then provides information with respect to the assessment being disputed and the reasons why the assessment is being disputed and submits those reasons by clicking on the Submit button at the bottom of the "File a formal dispute” page. Taxpayers who are disputing their tax assessment through My Account can also scan and send supporting documents relating to that dispute to the Agency.

While filing a dispute through My Account is certainly faster than mailing (or faxing) a hard copy of the Notice of Objection, not all taxpayers want to use that option. Taxpayers who choose instead to file their objection using a hard copy of a Notice of Objection form can find the most current version of the CRA’s standardized T400A Objection on the Agency’s website at T400A Notice of Objection - Income Tax Act - Canada.ca.

Taxpayers aren’t obligated to use the CRA’s official Notice of Objection form – any written communication which makes it clear that the taxpayer is objecting to their Notice of Assessment will do. Nonetheless, there’s no reason not to use the standardized form, and there are benefits to doing so. Using the T400A form will make it clear to the CRA that a formal objection is being filed, will present the necessary information in a format with which the Agency is familiar, and will also mean that no required information is inadvertently omitted. It’s also helpful to include a copy of the Notice of Assessment which is being disputed. Taxpayers should also consider ensuring proof of both delivery and time of delivery by sending the form or letter to the Appeals Intake Centre in a way which provides for tracking and proof of delivery.

There is a single Appeals Intake Centre, and the mailing address for that Centre can be found on the CRA’s Notice of Objection form. A Notice of Objection can also be faxed to the Appeals Intake Centre, and the fax numbers for the Centre are available on the CRA website at File an objection – Income tax – Canada.ca. Finally, taxpayers can contact the CRA at its objection enquires phone line in order to get information about the status of their appeal; the toll-free telephone number for calls from within Canada to that line is 1-800-959-5513. Taxpayers who filed their objection through My Account can find out the status of their appeal by checking the “Progress Tracker” feature on that service.

Filing a Notice of Objection, by any method, formally advises the CRA that the taxpayer is disputing the Agency’s determination of their tax liability for the taxation year in question. Not incidentally, the filing of an Objection also brings to a halt most efforts undertaken by the CRA to collect taxes which it considers owing for the taxation year under dispute (although, if the taxpayer is eventually found to owe an amount in dispute, interest on that amount will have accumulated in the interim). Where the taxpayer files an Objection, the CRA’s collection efforts are, in most cases, suspended until 90 days after the date the CRA’s decision on that Objection is sent to the taxpayer.

There is a time limit by which any Objection must be filed, albeit a reasonably generous one. Individual taxpayers must file an Objection by the later of 90 days from the mailing date of the Notice of Assessment (the date found at the top of page 1) or one year from the due date of the return which is being disputed. So, for tax returns for the 2025 tax year, the one-year deadline (which is usually, but not always, the later of those two dates) would be April 30, 2027 (or June 15, 2027 for self-employed taxpayers and their spouses). As with most things related to taxes, it’s best not to put it off. At the very least, if the taxpayer is ultimately found to owe some or all of the taxes assessed by the CRA, interest will have accrued on those taxes for the entire period since the filing due date and, if the filing of the Objection is delayed, the CRA may well have already commenced its collection efforts.

In the course of making its decision, the Agency may or may not contact the taxpayer for further discussions of the issues in dispute. Should the taxpayer be contacted, they may be asked to provide representations outlining their position, in writing or at a meeting. Through such representations and meetings, it may be possible for the taxpayer and the CRA to come to an agreement on the taxpayer’s tax liability. In either case, the CRA will either confirm its original assessment or change it. If the original assessment is changed, the CRA will issue a Notice of Reassessment outlining the changes. If the taxpayer continues to disagree with the CRA’s position, the next step is an appeal to the Tax Court of Canada. Once matters reach this point, it’s generally a good idea to consult a lawyer before deciding to file an appeal.

Detailed information on the objection process is available on the CRA website at File an objection – Income tax – Canada.ca. The Agency also publishes a useful pamphlet entitled Resolving Your Dispute: Objection and Appeal Rights under the Income Tax Act; the most recent release of that publication can be found on the CRA website at P148 Resolving your dispute: Objection rights under the Income Tax Act – Canada.ca.

While the view of many Canadians, especially at tax return filing time, is that our tax system exists solely to take money out of their pockets, the reality is far more nuanced. It is certainly true that Canadian tax laws cast a very wide net, in which very few sources of income escape taxation. The reality is also, however, that a substantial amount of tax revenue received by the federal government is returned to Canadians through tax credit and benefit programs. Amounts paid under those programs are received tax-free and this year, changes have been made to some programs which increase the amount provided to Canadian individuals and families.

While the view of many Canadians, especially at tax return filing time, is that our tax system exists solely to take money out of their pockets, the reality is far more nuanced. It is certainly true that Canadian tax laws cast a very wide net, in which very few sources of income escape taxation. The reality is also, however, that a substantial amount of tax revenue received by the federal government is returned to Canadians through tax credit and benefit programs. Amounts paid under those programs are received tax-free and this year, changes have been made to some programs which increase the amount provided to Canadian individuals and families.

The tax credit and benefit program year generally runs from July to the following June, meaning that the upcoming benefit year will begin in July 2026 and end in June 2027. The reason for that timing is that eligibility for (as well as the amount of) most federal and provincial tax credits and benefits is based, at least in part, on individual or family income for the previous year. Consequently, the determination of whether an individual or family is eligible for such benefits during the 2026-27 benefit year is based on income amounts earned and reported on the tax return for 2025. It follows, then, that in order to receive such benefits during the 2026-27 benefit year it is necessary for all individuals, and both parents within a family, to file a return for 2025.

Unfortunately, a substantial number of eligible recipients don’t receive benefits to which they are entitled, simply because they haven’t filed a tax return for the previous year, leaving potentially hundreds or thousands of dollars in tax-free income unclaimed each year. As well, many Canadians who do receive such benefits but who then fail to file a tax return each year can see their benefit payments stop, even though they remain eligible to receive those benefits. Eligibility for federal and provincial credits and benefits begins, therefore, with filing an annual tax return. And, while the 2025 return filing deadline for most individuals of April 30, 2026 has passed, it’s not too late to file a return. While late filing of a return may result in delayed payment of benefits, eligibility for those benefit payments will not be lost.

It should be noted, as well, that while the federal government refers to these benefits under the umbrella term “child and family benefits”, it’s wrong to conclude that benefits are only available to parents and/or married individuals. Of the three benefit programs outlined below which will be in place during the upcoming benefit year, only the Canada Child Benefit/Child Disability Benefit program requires that a taxpayer be a parent, and none of the benefit programs require that a taxpayer be married or in a common-law relationship. As well, each of these tax credits/benefits are what are termed “status” credits/benefits, in which eligibility for and the amount of the credit/benefit is based on the taxpayer’s Canadian residence, income, marital status, and (for the Canada Child Benefit/Child Disability Benefit only) number of children. Unlike other deductions and credits claimable under our tax system, there is no requirement for an individual or family to make any expenditure of funds for any purpose in order to be eligible for the following credit/benefit programs.

GST/HST Credit/Groceries and Essentials Benefit

The GST/HST credit is a non-taxable amount paid four times a year (on the fifth of July, October, January, and April) to lower- and middle-income individuals and families, to help offset the cost of the goods and services tax/harmonized sales tax (GST/HST) that they pay. Generally, the credit is available to Canadian residents who meet all of the following criteria:

• aged 19 years of age or older; or
• under age 19 and
  • have or had a spouse or common law partner; or
  • are or were a parent and live (or lived) with their child.

A number of changes to the GST/HST tax credit were announced in the 2026 federal budget; those changes will mean increased payments under the program for eligible Canadians.

The first change is a renaming of the GST/HST tax credit. As of July 1, 2026, that program will be renamed the “Canada Groceries and Essentials Benefit” (CGEB). The change is one of name only, as the tax-free status, eligibility criteria, and payment schedule for the CGEB remain the same as for the former GST/HST tax credit.

The second change involves an increase in the amount of benefit which will be paid starting with the 2026-27 year. Benefit payments for that year, and until 2031, will be increased by 25%. Following that change, maximum benefits payable under the GEGB program for 2026-27 will be as follows:

• $679 for single individuals;
• $890 for individuals who are married or have a common-law partner; and
• $234 for each child under the age of 19.

Finally, the federal government will be providing a one-time “top-up” payment of the current GST/HST benefit. That payment will be made in June 2026, starting around June 5. The payment will be made to all Canadians who received a GST/HST benefit payment in January 2026, and will be equal to 50% of the total GST/HST credit payments received by such recipients during the 2025-26 benefit year. The amount of the top-up payment will range from $267 (for single individuals without children) to $717 (for single parent or two parent families with four children). Information on the one-time top-up payment is available on the federal government website at One-time GST/HST credit top-up payment - Canada.ca.

Detailed information on the new Groceries and Essentials Benefit can be found on the CRA website at Canada Groceries and Essentials Benefit - Canada.ca.

Canada Workers Benefit

The Canada Workers Benefit (CWB) is a refundable tax credit paid to lower income Canadian residents who are aged 19 or older or are married or have a common-law spouse or child with whom they live, and who have “working income” of at least $3,000. For the purposes of the CWB, such working income can be from employment or self-employment.

The amount of CWB which an individual or family can receive depends on marital status and net income. The basic amounts payable for the 2026 benefit year, and the net income levels at which eligibility for that basic benefit is eroded, are as follows.

• $1,665 for single individuals
  The single individual benefit is reduced if adjusted net income is more than $27,392.
• $2,869 for families 
  The family benefit amount is reduced if adjusted family net income is more than $31,251.

In order to apply for the CWB, a recipient must file their tax return electronically and follow the instructions provided for the particular tax return preparation software, or, if filing a paper return, must complete and file a Schedule 6 with that tax return.

More detailed information on the CWB, including the availability of advanced payments of the Benefit, can be found at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-workers-benefit.html.

Canada Child Benefit

The Canada Child Benefit (CCB) is a tax-free monthly payment made to eligible families to help with the cost of raising children under 18 years of age. The CCB is paid to the parent who is primarily responsible for the care and upbringing of the child or children, and the amount varies with the age and number of children.

The CCB is also a means-tested benefit, with the benefit amount being reduced as family net income increases. CCB amounts paid during the 2026-27 benefit year are based on family net income for 2025.

The maximum amounts payable for the benefit year running from July 2026 to June 2027 are as follows.

For each child:

• under 6 years of age: $8,157 per year ($679.75 per month)
• 6 to 17 years of age: $6,883 per year ($573.58 per month)

Where family net income for 2025 is less than $38,237, recipients will receive the maximum amount outlined above for 2026-27, with no reductions.

Individuals and families who may be eligible for the CCB will have their eligibility automatically assessed when they file their tax return for 2025: there is no requirement to file a particular schedule or other application. More information on the CTB is available on the federal government website at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview.html.

Child Disability Benefit

Families who have children under the age of 18 for whom the federal disability tax credit can be claimed, and who are eligible to receive the Canada Child Benefit, will also receive the Child Disability Benefit (CDB).

For the 2026-27 benefit year, the CDB is equal to $3,480 for each eligible child, with the benefit amount being reduced where family net income is greater than $82,847. There is no requirement to apply for the CDB, as that benefit will automatically be issued to any family that has an eligible child for whom they are already receiving the Canada Child Benefit.

More information on the CDB is available at Child disability benefit - Canada.ca.

While the number and variety of federal child and family benefits, and the varying eligibility criteria for each, can be confusing, the necessary determinations and calculations are done by the federal government. The only step which need be taken by an individual is the filing of an annual tax return. Taxpayers who wish to find information on the benefits for which they may be eligible (and to obtain an online estimate of the amount of those benefits) can refer to the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/child-family-benefits.html and Tax credits and benefits for individuals - Canada.ca, where detailed information on each such benefit program can be found.

Two quarterly newsletters have been added – one dealing with personal issues, and one dealing with corporate issues.

Two quarterly newsletters have been added – one dealing with personal issues, and one dealing with corporate issues.

They can be accessed below.

Corporate:

Issue #76 Corporate

Personal:

Issue #76 Personal

The 2026 Spring Economic Update delivered by the Minister of Finance on April 28 included a number of targeted tax relief measures for Canadian individual taxpayers. Some of those measures are summarized below.

The 2026 Spring Economic Update delivered by the Minister of Finance on April 28 included a number of targeted tax relief measures for Canadian individual taxpayers. Some of those measures are summarized below.

Changes to Disability Tax Credit certification program

Canadians who are affected by a severe and prolonged impairment in physical or mental functions which significantly restricts their ability to carry out one or more basic activities of daily life can claim a non-refundable federal tax credit. For 2026, the amount of that Disability Tax Credit (DTC) is $10,341, which provides a reduction in federal tax of up to $1,448. Such individuals can also claim a similar credit for provincial tax purposes, with the amount dependent on the taxpayer’s province of residence.

The DTC is a valuable credit for those who are eligible, and obtaining a valid DTC certificate also enables such individuals to have access to a number of other benefit and credit programs for disabled individuals. However, the administrative process of obtaining such a certificate is often very difficult and time-consuming. Under current rules, a qualified medical practitioner must complete a lengthy form which requires not just the patient’s diagnosis, but extensive details on how their disability affects and restricts their ability to carry out activities of daily life. That form must be submitted to the Canada Revenue Agency as part of the application for a Disability Tax Credit Certificate, and a significant amount of time can elapse before a decision on that application is made and communicated to the individual. And, of course, individuals who do not have a family doctor may not have anyone who can complete the necessary medical assessment which is a required part of their DTC Certificate application.

The 2026 Spring Economic Update proposes changes to the DTC certification program in two areas. First, the listing of the types of impairments which can be certified by a medical professional other than a medical doctor has been expanded. Following that change, which is effective for DTC certificates issued after 2026, occupational therapists, physiotherapists, speech-language pathologists, and podiatrists will be able to certify additional specified types of impairments for purposes of a DTC Certificate application.

The second change provides that where an individual has been diagnosed with any one of a lengthy list of medical conditions (including such conditions as Alzheimer’s disease, severe intellectual disability, paraplegia, schizophrenia, or traumatic brain injury), a DTC application will require only that a medical practitioner certify that the individual has that medical condition. Unlike the current application, there will be no requirement for the medical practitioner to provide a detailed summary of how that medical condition affects the ability of an individual to carry out basic tasks of daily life. This change is effective for the 2026 and subsequent tax years.

The measures contained in the 2026 Spring Economic Update with respect to the Disability Tax Credit are purely administrative in nature and do not change the disability criteria which must be met to qualify for the DTC. The CRA will continue to have authority to ask for additional information to verify that these criteria are met.

Additional information on the changes to the Disability Tax Credit certification process can be found on the Finance Canada website at Tax measures: Supplementary information | Spring Economic Update 2026.

Changes to Home Buyers’ Plan

The federal Home Buyers’ Plan allows an eligible first-time home buyer to withdraw up to $60,000 from their registered retirement savings plan (RRSP) on a tax-free basis. (Eligible home buyers purchasing as joint owners can each withdraw up to $60,000.) All amounts withdrawn from an RRSP under the HBP must be repaid to that RRSP over a 15-year period, with such repayments starting in the second year following the year the withdrawal was made. Where amounts are not repaid as required, they are included in the taxpayer’s income for the year.

In the 2024 Federal Budget, changes to the HBP were announced which would permit HBP participants to defer any repayment of funds to their RRSP until the fifth year following the date of withdrawal. That change was effective for withdrawals made between January 1, 2022 and December 31, 2025.

In the 2026 Spring Economic Update the government announced that the ability to defer repayments under the HBP until the fifth year following the year of withdrawal would be extended to apply to HBP participants making a first withdrawal under the Plan up to the end of 2028.

More information on the changes to the HBP is available at Tax measures: Supplementary information | Spring Economic Update 2026.

Labour mobility deduction for tradespeople

Eligible tradespeople working in the construction industry are able to claim a deduction for expenses incurred in connection with one or more temporary work-related relocations. Under existing rules, such individuals can claim up to $4,000 in eligible temporary relocation expenses per year, with the deduction for each such temporary work relocation limited to 50% of employment income earned at that temporary location. As well, to qualify for the deduction, a “distance rule” provides that the individual must take up temporary lodging in Canada which is at least 150 kilometres closer to the temporary work location than their ordinary residence.

Effective for the 2026 and subsequent tax years, changes have been made to increase the maximum annual deduction from $4,000 to $10,000 (with that amount to be indexed annually after 2026). As well, the distance rule has been modified to provide that the individual’s temporary lodging in Canada must be at least 120 kilometres closer to a temporary work location than their ordinary residence.

Information on the changes can be found on the Finance Canada website at Tax measures: Supplementary information | Spring Economic Update 2026.

For most taxpayers, the worst-case outcome when completing their tax return for the previous year is finding out that they owe an additional tax amount to the federal government. However, for Canadians who are receiving Old Age Security (OAS) benefits, there can be additional bad news. For such Canadians, one of the calculations made as part of preparing a tax return is a determination of whether the taxpayer received OAS benefits during the previous year to which they were not entitled. If that’s found to be the case, the taxpayer will be required to repay a portion of benefits already received – and likely already spent.

For most taxpayers, the worst-case outcome when completing their tax return for the previous year is finding out that they owe an additional tax amount to the federal government. However, for Canadians who are receiving Old Age Security (OAS) benefits, there can be additional bad news. For such Canadians, one of the calculations made as part of preparing a tax return is a determination of whether the taxpayer received OAS benefits during the previous year to which they were not entitled. If that’s found to be the case, the taxpayer will be required to repay a portion of benefits already received – and likely already spent.

Many OAS recipients – especially those who have only recently begun to receive such benefits – are unaware that OAS benefits received may have to be repaid to the federal government, and even fewer are aware of exactly how and when they could become subject to that repayment requirement. To understand that process, and how it is administered, a bit of background is helpful.

The Old Age Security program is one of the two major public retirement income programs in Canada – the other being the Canada Pension Plan. The two programs differ in two significant ways. First, while the Canada Pension Plan is funded by employer and employee contributions, OAS benefits are financed entirely out of general federal government revenues. Second, CPP retirement benefits are based on contributions made throughout the recipient’s working life and are unaffected by their income while receiving those retirement benefits. Recipients of OAS benefits can, however, be required to repay some or all of those benefits where their net income exceeds a prescribed threshold.

That “OAS recovery tax” or clawback, as it is universally known, is administered on a one-year time lag basis. Anyone who received OAS benefits during 2025 and had net income for that year over a specified dollar amount threshold will be required to repay a portion (or all) of the OAS benefits which were received during 2025.

The federal government becomes aware of an individual’s net income for 2025 only once the tax return for that year is filed, usually by April 30 of 2026, when information on that return will disclose that OAS benefits received must be repaid. That repayment does not have to be made when the return is filed: rather, the overpayment is recovered by reducing the amount of OAS benefits paid to the recipient throughout the next benefit year.

For example, an individual who received OAS benefits during 2025 and had net income for the year over $93,454 will be subject to the clawback. They must repay OAS amounts received at a rate of 15 cents (or 15%) of every dollar of income over the clawback income threshold, as in the following simplified example.

The OAS clawback threshold for 2025 is $93,454.

If the individual’s net income in 2025 was $98,500, then repayment would be 15% of the difference between $98,500 and $93,454:

$98,500 - $93,454 = $5,046

$5,046 x 0.15 = $756.90

The individual would have to repay $756.90 of OAS benefits received.

Consequently, in the following benefit year (which covers OAS benefit payment dates from July 2026 to June 2027), OAS benefits received will be reduced by $63.08 per month ($756.90 divided by 12 months).

The OAS clawback is a perpetual irritant to those affected by it, perhaps because of the sense that they are being penalized in retirement for having lived frugally or been good managers of their finances during their working years, in order to put aside savings for a financially comfortable retirement, or to leave an inheritance for their children. While any sense of grievance can’t alter the reality of the OAS clawback, there are strategies which can be put in place to either minimize or even eliminate one’s exposure to that clawback. Like most individual tax planning, many of those planning considerations are better addressed earlier in life, prior to retirement: however, it’s not too late, once one is already receiving OAS, to take advantage of strategies to avoid or minimize the clawback in future years.

In all cases, no matter what strategy is employed, the goal is to “smooth” one’s income from year to year, so that net income for each year comes in under the OAS clawback threshold and, not incidentally, minimizes exposure to the higher federal and provincial income tax rates which in most cases apply once taxable income approaches  $100,000. Some of the available strategies are outlined below.

Managing the amount and timing of RRIF withdrawals

Taxpayers who have a registered retirement income fund (RRIF) and are age 65 or over must make a minimum required withdrawal (MRW) from that RRIF each year. The amount of the MRW is a percentage of the total amount in the RRIF and is based on the taxpayer’s age.

As the name suggests, the taxpayer has no options when it comes to the MRW, which must be made each year in the required amount, with that amount included in taxable income for the year.

Once the MRW is made, however, any additional RRIF withdrawals during the year are entirely the choice of the taxpayer, and that choice can be made, or changed, at any time. Taxpayers can and should monitor both the amount and the timing of those withdrawals. All amounts withdrawn from an RRIF are fully taxable in the year they are withdrawn, without exception, and such funds can never be re-contributed to the RRIF. As well, all such withdrawals will be included in net income for purposes of determining the taxpayer’s eligibility for OAS and a number of other tax credit and benefit programs.

From a financial planning perspective, the optimal annual withdrawal from an RRIF is the amount which, when combined with other retirement income sources, enables the taxpayer to live a comfortable lifestyle while minimizing the amount of income tax they must pay, or their exposure to the OAS clawback.

Retirement income needs fluctuate over time, with expenses usually higher in the earlier retirement years and then decreasing. As well, life circumstances change (a spouse dies, a family home is sold to downsize to a smaller and less costly residence) and retirement income needs change as a consequence of those changed life circumstances. Many taxpayers set the amount of annual RRIF withdrawals when the plan is set up at age 71 and that arrangement simply remains in place. However, optional RRIF withdrawals should be based, not on a fixed, unchanging amount, but the amount which fits current life circumstances and income requirements.

Consequently, a withdrawal plan in which the MRW is made at the beginning of the calendar year and further withdrawals are made on an as-needed basis will ensure that the taxpayer has sufficient funds to support a comfortable retirement while minimizing the risk of negative tax and clawback consequences that can follow where amounts in excess of annual income requirements have been withdrawn unnecessarily from the RRIF.

Similarly, where a large, one-time RRIF withdrawal is planned – whether early in retirement to pay for long-deferred travel plans or, in later years, to finance home renovations needed to accommodate changed health circumstances – splitting that withdrawal between two taxation years (for instance, one-half in December of 2026 and one-half in January 2027) will minimize net income and consequently exposure to both a higher tax rate and the OAS clawback in both years.

Sheltering investment income within a Tax-Free Savings Account (TFSA)

Taxpayers who are over the age of 71 have relatively few available means to shelter income from tax. Investment income earned within an RRIF is of course not taxable as it is earned, but all RRIF withdrawals, whether they represent amounts saved or investment income earned, are fully taxed on withdrawal. As well, investment income of any kind subsequently earned on such withdrawals will become taxable income in the year that investment income is earned.

Practically speaking, the best strategy (and for those over age 71, the only strategy) to shelter investment income earned on amounts withdrawn from an RRIF is to contribute those RRIF withdrawals to a Tax-Free Savings Account (TFSA), to the extent that the taxpayer has contribution room. Unlike RRIFs and RRSPs, a TFSA can be opened and held by a taxpayer of any age. Amounts contributed to a TFSA are not deductible from income, but all investment income earned within the TFSA accumulates free of tax. Finally, any and all amounts withdrawn from a TFSA (whether original contributions or investment income earned) are not taxed on withdrawal, and are not included in income for purposes of the OAS clawback.

Especially where amounts withdrawn from an RRIF are substantial, the amount of investment income earned throughout the year on those withdrawals can have a real impact on an individual’s tax liability. Contributing RRIF withdrawals to a TFSA where such funds can be invested, and withdrawn as needed, will eliminate that liability.

Detailed information on how to determine one’s contribution limit and on the rules governing contributions to and withdrawals from a TFSA can be found on the Canada Revenue Agency website at Tax-free Savings Account (TFSA) - Canada.ca.

Pension income splitting

For married taxpayers, pension income splitting is likely the most valuable strategy available to minimize both tax liability and exposure to the OAS clawback.

Using pension income splitting, the spouse who has income over the OAS clawback threshold re-allocates the “excess” income to their spouse on the annual return, and that income is then considered to be income of the recipient spouse, for purposes of both income tax and the OAS clawback. To be eligible for pension income splitting, the income to be reallocated must be private pension income, which is generally income from an RRSP or RRIF, or from an employer-sponsored pension plan. CPP and OAS benefit amounts do not qualify for pension income splitting.

There are two reasons why pension income splitting is a particularly attractive strategy for avoiding or minimizing the OAS clawback. First, there is no need to actually change the source or amount of income received by each spouse, as the reallocation of income is “notional”, existing only on the return for the year. Second, no decision has to be made on pension income splitting until it’s time to file the return for the previous year, meaning that spouses can easily calculate exactly how much income has to be reallocated to produce the desired result. More information on the kinds of income eligible for pension income splitting, and the mechanics of the process, can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/pension-income-splitting.html.

Detailed information on the OAS clawback can be found on the same website at https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/repayment.html.

When the filing of the required annual tax return goes entirely as planned and hoped, the taxpayer will have prepared a return that is complete and correct and filed that return by the required filing deadline. The Canada Revenue Agency (CRA) will issue a Notice of Assessment indicating that the return is “assessed as filed”, meaning that the CRA agrees with the information filed and the amount of tax payable determined by the taxpayer. While that’s the outcome everyone is hoping for, it’s a result which can be derailed in any number of ways.

When the filing of the required annual tax return goes entirely as planned and hoped, the taxpayer will have prepared a return that is complete and correct and filed that return by the required filing deadline. The Canada Revenue Agency (CRA) will issue a Notice of Assessment indicating that the return is “assessed as filed”, meaning that the CRA agrees with the information filed and the amount of tax payable determined by the taxpayer. While that’s the outcome everyone is hoping for, it’s a result which can be derailed in any number of ways.

By April 19, 2026, around 19.5 million individual income tax returns for the 2025 tax year had been filed with the CRA. And, inevitably, some of those returns contain errors or omissions that must be corrected.

Nearly 95% of the returns which have already been filed for the 2025 tax year were filed by EFILE or NETFILE, meaning that the return was prepared using tax return preparation software. The use of such software significantly reduces the chance of making a clerical or arithmetical error, like entering an amount on the wrong line or adding a column of figures incorrectly. However, no matter how good the software, it can work only with the information that is provided to it. Sometimes taxpayers who file their returns early then receive a tax information slip that should have been included on that return (or, more frequently, locate a tax information slip that had been received but was overlooked). It’s also easy to make an inputting error when transposing figures from an information slip (a T4 from one’s employer, for instance) into the software, such that $76,326 in income becomes $73,626 or $66,326. Whatever the cause, where the figures input are incorrect, or information is missing, those errors or omissions will be reflected in the final (incorrect) tax payable figure produced by the software.

When the error or omission is discovered in a return which has already been filed, the question which immediately arises is how to make things right. The first impulse of many taxpayers is to file another return, in which the complete and correct information is provided, but that’s not the right answer. There are, however, three separate methods by which most mistakes or omissions made in an already filed tax return can be corrected; each such method has its own requirements, limitations, and time frames for processing.

The 95% of return filers who used tax return preparation software to file their return can use that same software to change the return. (All tax return software programs certified for use by the CRA include that option, known as "ReFile".) The ReFile service is available seven days a week but is offline for maintenance from 3 a.m. to 6 a.m. Eastern Time each day.

The types of changes which can be made using ReFile include the most frequent sources of filing errors, including reporting income (such as a T4 slip or tips), claiming a deduction, credit, or expense (such as childcare or medical costs), or adding a missing tax slip (such as an RRSP contribution receipt). There are, however, limitations to the kinds of changes which can be made to an already filed return online. Specifically, it’s not possible to apply for benefits or credits, make or revise an election, allocate a refund to other CRA accounts, or update personal information, including a mailing or email address, direct deposit information, marital status, or name.

In addition, taxpayers cannot use ReFile to make a change to a return for the 2020 or earlier tax years, a bankruptcy return, an optional T1 return for a deceased taxpayer, a return filed with the incorrect province or territory of residence, or a return for a non-resident. More information on how to make a correction in an already filed return using ReFile can be found on the CRA website at Changing a tax return - Personal income tax - Canada.ca.

The second online option is available to taxpayers who have registered for the CRA’s “My Account” service. Those taxpayers can make a change or correction on their already-filed return using the “Change My Return” feature in My Account. The steps needed to do so are as follows:

1. Sign in to your CRA account.
2. Select Individual if you are changing your own return or Representative if you are changing someone else's.
3. Select Tax returns.
4. Find and select Change my return.
5. Select the tax year you want to change and follow the steps.
6. Save your confirmation number and summary of changes for your records.

As with ReFile, there are situations in which the Change my Return website feature cannot be used to correct a mistake in an already filed return, including the following:

• A return for the 2015 or earlier tax years;
• A bankruptcy return (or any year before the year of bankruptcy);
• An optional T1 return for a deceased taxpayer;
• A return filed with the incorrect province or territory of residence;
• Certain international and non-resident returns.

Where neither ReFile nor Change my Return can be used to make a correction on an already filed return (or where the taxpayer prefers not to use an online option), filing the request using hard copy to be sent by mail to the CRA is still possible. The paper form to be used is Form T1-ADJ E (23), which can be found on the CRA website at T1 Adjustment Request (canada.ca). Those who are unable to print the form off the website can order a copy to be sent to them by mail by calling the CRA’s individual income tax enquiries line at 1-800-959-8281. Detailed instructions on how to complete and submit a T1-ADJ E (23) can be found on page 2 of that form.

Taxpayers who are unsure of which method they may (or may not) be able to use to make a change on their return can find assistance through the “Confirm which option you can use” service on the CRA website. That feature, which is available on the CRA website at Changing a tax return - Personal income tax - Canada.ca as both a series of interactive questions and in a text document, will let the taxpayer know whether it’s possible to make the change online, or whether their request must be sent by mail.

No matter which method was originally used to file the return, or whether the correction is made online or in hard copy, there is one invariable rule. In all cases, it’s necessary to wait until the Notice of Assessment for the (incorrect) return already filed is received.  Corrections to a return which are submitted prior to the time that return is assessed simply can’t be processed by the Agency.

Once the Notice of Assessment is received, and an adjustment request is made, it will take at least a few weeks before the CRA responds by issuing a Notice of Reassessment, based on the new information provided by the taxpayer. The current estimates for a response from the CRA are two weeks (for non-complex adjustment requests filed online) and up to 12 weeks for those submitted in hard copy. Not surprisingly, requests which are submitted during the CRA’s peak return processing period between March and July will likely take longer.

Sometimes the CRA will contact the taxpayer, even before a return is assessed (or reassessed), to request further information, clarification, or documentation of deductions or credits claimed (for example, receipts documenting medical expenses claimed, or childcare costs). Whatever the nature of the request, the best course of action is to respond promptly, and to provide the requested documents or information. The CRA can assess only on the basis of the information with which it is provided, and it is the taxpayer’s responsibility to provide support for any deduction or credit claims made. Where a request for information or supporting documentation for a claimed deduction or credit is ignored by the taxpayer, the assessment will proceed on the basis that such support does not exist. Providing the requested information or supporting documentation can usually resolve the question to the CRA’s satisfaction, and its assessment of the taxpayer’s return can then be completed.

The Canadian tax system is what is termed a self-assessing system, in which taxpayers take the initiative to complete and file a tax return each year. In that tax return they provide information on income earned during the previous year, claim any tax deductions and credits to which they are entitled, and arrive at an estimate of tax owed for the year. In most cases the filing of that tax return will result in a tax refund paid to the taxpayer, while a minority of taxpayers will have a tax balance owed for the year, which must be paid on or before April 30.

The Canadian tax system is what is termed a self-assessing system, in which taxpayers take the initiative to complete and file a tax return each year. In that tax return they provide information on income earned during the previous year, claim any tax deductions and credits to which they are entitled, and arrive at an estimate of tax owed for the year. In most cases the filing of that tax return will result in a tax refund paid to the taxpayer, while a minority of taxpayers will have a tax balance owed for the year, which must be paid on or before April 30.

By and large, it’s a system which works remarkably well, as the vast majority of Canadians do file a return and pay any taxes owed on a timely basis. The cost of not doing so can, however, be steep, especially where a tax amount is owed on filing. Where there is a tax balance owed and payment in full is not made by the April 30 deadline, the Canada Revenue Agency will begin levying interest charges on any unpaid amount, starting May 1. Interest amounts payable to the CRA can mount up very quickly, for two reasons. First, the interest rate charged by the CRA is, by law, higher than ordinary commercial rates. For the second quarter of 2026 (April 1 - June 30) the rate charged on unpaid tax amounts is 7%. More significantly, all interest charges levied by the CRA on unpaid taxes are compounded daily, meaning that each day, interest is charged on the previous days interest. It’s not hard to see how interest costs can accumulate quickly.

Where a tax amount is owed and the taxpayer does not pay that amount and also does not file their tax return for the year, the news gets worse. In such circumstances, an immediate late-filing penalty is imposed, equal to 5% of the outstanding tax amount owed. A further penalty of 1% of that tax amount owed is then levied for every full month that the return is late, to a maximum of 12 months. If the taxpayer has a history of late filing or late payment, penalty amounts increase to an immediate 10% late-filing penalty, plus 2% per month, to a maximum of 20 months. In a worst-case scenario, the total penalty amounts imposed can reach 50% of the tax amount owed – and that doesn’t include interest charges which will be levied on both the outstanding tax amount and on all accumulating penalty charges.

Where a failure to meet one’s tax obligations is simply the result of carelessness or negligence on the part of the taxpayer, it’s really not possible to avoid such charges. Sometimes, however, taxpayers fail to meet their tax obligations for reasons that are entirely outside their control. When that happens, the CRA may be willing to extend relief by forgiving interest and penalty charges, in whole or in part, through the Agency’s Taxpayer Relief Provisions.

It's important to note, at the outset, that while the CRA has issued guidelines on the circumstances in which interest and penalty relief may be provided, the decision to provide such relief is entirely discretionary on the Agency’s part – there is no right to interest and penalty relief. Second, while interest and penalty relief may be made available to the taxpayer, no relief is provided with respect to actual tax amounts owed. No matter how dire the circumstances, tax amounts owed must always be paid.

The guidelines issued by the CRA on when interest and penalty relief may be available fall into two general categories. The first addresses taxpayers who are unable to meet their tax obligations as the result of extraordinary circumstances, whether those circumstances are personal (including, for instance, a death in the family or personal illness or a serious accident) or are events or circumstances which affect a number of taxpayers. Such events and circumstances include extreme weather events or natural or man-made disasters, like floods and wildfires. Nearly every year for the past several years Canadians across the country have had to leave their homes, sometimes for an extended period of time, as a consequence of wildfires or spring floods. At such times meeting one’s tax obligations is understandably a very low priority and, in the worst case scenario, the weather event or disaster which forced an evacuation may also result in the destruction of the taxpayer’s home, including their financial and tax records, making it difficult or impossible to file returns or determine or pay tax amounts owed.

Finally, in a situation which is becoming a reality for an increasing number of Canadians, the CRA is prepared to consider providing interest relief where the taxpayer is experiencing significant financial hardship. As every Canadian knows, the cost of living (especially the cost of food and energy, both completely unavoidable expenses) has increased significantly over the past five or six years. According to Statistics Canada, the cost of groceries rose by 30.1% in the five years between 2021 and 2026. This year, the 21.2% month-over-month increase in the cost of gasoline for April 2026 was, according to Statistics Canada, the largest such gasoline price increase on record.

The CRA’s guidelines, as outlined on the Agency’s website, indicate that it will consider waiving or cancelling interest charges, in whole or in part, where the taxpayer cannot pay those charges due to financial hardship, where paying interest amounts owed would make it difficult for the taxpayer to provide basic necessities, such as food, medical help, transportation, or shelter for a prolonged period of time, or where interest charges make up the majority of the amount owed and the taxpayer is unable to make a reasonable payment arrangement with the CRA.

Regardless of the reasons or circumstances (i.e., natural or man-made disaster, adverse personal or family circumstances, or financial hardship) which have prompted the taxpayer to submit an application for relief, the process of filing that application is the same. Taxpayers who have registered for the CRA online service My Account can file their application using that service. Those who are not registered for My Account, or would prefer filing a paper application, can find the current version of the required form on the CRA website at Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties and Interest. The address to which the completed form should be sent (which will depend on the taxpayer’s province of residence) can be found on the last page of Form RC4288.

Regardless of the circumstances which led the taxpayer to make an application for interest or penalty relief, the CRA requires that the taxpayer provide documentation of the reasons for the application. The nature of that documentation will, of course, differ, depending on the reason that the application was made.

In order to receive relief in situations of financial hardship, a taxpayer must be able to provide the CRA with detailed information on their current financial situation. That financial situation is outlined on a prescribed CRA form which is available at Form RC376, Taxpayer Relief Request – Statement of Income and Expenses and Assets and Liabilities for Individuals. In addition to the information submitted on that form, the taxpayer must also provide supporting documentation, such as a current mortgage statement, property tax assessment, or rental agreement, along with statements for loans and recurring bills and credit card and bank statements for the past three months.

Where the application is made owing to serious illness or accident, the taxpayer should provide a doctor’s certificate indicating the type of illness, expected length of treatment, any hospitalization dates, and the effect that the medical condition might have had on the taxpayer’s ability to meet their tax obligations. Where there has been a death in the family, the CRA requests that a death certificate or obituary be provided.

Finally, where the taxpayer has been unable to meet their tax obligations because of a man-made or natural disaster, the CRA will be looking for insurance reports or fire or police reports documenting the time, place, and impact of that disaster.

Whatever the reason for the application, or how it is filed, the Agency will review the information submitted and make a determination of whether to cancel interest and/or penalty amounts owed, in whole or in part. The factors considered by the Agency in determining whether to grant relief will, of course, depend for the most part on the circumstances giving rise to the application. In general, however, the Agency will consider the taxpayer’s tax return filing and payment history, whether the taxpayer knowingly let a balance owing exist (resulting in additional interest charges), whether reasonable care was taken in the management of the taxpayer’s tax affairs, and finally, whether the taxpayer acted quickly to correct any delay or omission.

The CRA’s self-imposed “service standard” on straightforward taxpayer relief applications is to make a decision within six months (180 days) after the application is received. However, not surprisingly, the Agency is currently receiving a higher than usual number of applications, such that the average processing time for applications is now closer to 14 months.

Where the taxpayer’s request is denied by the CRA, they can request that the decision be reviewed. If that decision is also negative, the only recourse is to ask a judge to review the CRA’s decision. In the great majority of cases, however, the cost of taking that step is likely to be greater than the amount of interest and penalties at issue.

In all cases, the best course of action for the taxpayer is to be proactive – to contact the CRA as soon as the taxpayer is aware that filing of a required return, or paying taxes owed in full and on a timely basis, will not be possible. Taking the initiative and moving quickly to resolve the problem will both minimize the amount of interest which will accrue on unpaid taxes and will count in the taxpayer’s favour when the CRA considers whether to allow an application for waiver of those interest and penalty charges.

Taxpayers who are unsure of whether their particular circumstances will qualify for relief under this program can use a self-evaluation tool provided on the CRA website at https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/complaints-disputes/cancel-waive-penalties-interest/self-evaluation-learning-tool.html. To use that feature, the taxpayer provides detailed information (which is not   saved or submitted to the CRA) about their situation and is provided with information about whether that situation could qualify for taxpayer relief and/or if there are other federal programs which might provide a better option.

Detailed information on the Taxpayer Relief Provisions is available 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.

While the rules of the Canadian tax system include a great number of tax deduction and credit claims which can be made by individuals, the general rule is that personal living expenses do not, in most cases, qualify for any kind of tax assistance or tax relief. However (and fortunately for parents who must expend significant amounts over the course of a tax year for the cost of day care, after-school care, a babysitter, or even a nanny) an exception is provided from that rule in the form of the child care expenses tax deduction.

While the rules of the Canadian tax system include a great number of tax deduction and credit claims which can be made by individuals, the general rule is that personal living expenses do not, in most cases, qualify for any kind of tax assistance or tax relief. However (and fortunately for parents who must expend significant amounts over the course of a tax year for the cost of day care, after-school care, a babysitter, or even a nanny) an exception is provided from that rule in the form of the child care expenses tax deduction.

That child care expenses tax deduction is particularly beneficial in two ways: first, while there are limits on the amount of child care expenses which can be deducted (and those limits are not indexed to inflation and have not changed since 2014), the limits imposed are still relatively generous ones. Second, and more important, the child care expense deduction enables parents to deduct eligible expenses from income on a dollar-for-dollar basis, meaning that income used to pay eligible child care expenses is income which is not taxed. As well, the rule determining whether child care costs incurred are deductible is fairly straightforward and easy to meet – parents who incur eligible child care costs in order to work (whether in employment or self-employment) or, in some cases to attend school, can deduct those costs from income.

The amount of any available child care deduction to be claimed for the 2025 tax year is calculated on Form T778 E(25), and that calculation can seem forbiddingly complex. However, at the end of the day, the amount of child care expenses which can be deducted is simply the least of three figures, and only one of those figures requires a calculation. The steps involved in determining the amount of available child care expenses deduction are as follows.

First, the amount of any deduction for child care expenses is limited to two-thirds of the taxpayer’s earned income for the year. The income figure used to calculate the two-thirds figure is, generally, the amount shown on Line 23600 of the annual tax return. Where the family incurring child care expenses is a two-income family, it is usually the spouse with the lower net income who must make the claim and consequently it is their net income which is used to provide that two-thirds of net income figure.

The second figure to be determined is the amount actually paid for eligible child care costs during the year. While virtually any licensed child care arrangement will qualify for purposes of the deduction, some more informal arrangements may not. Specifically, no deduction is available for amounts paid to most family members to provide child care. Consequently, it’s not possible for a working spouse to pay the stay-at-home parent to provide child care, nor is it possible to pay an older sibling (or any other related person) who is under the age of 18 to provide such services and to claim a deduction for those expenses incurred. As well, where a claim is made for a deduction for child care expenses on the annual return, the claimant must obtain (and be prepared to provide to the tax authorities) the social insurance number of the individual providing the care as well as a receipt showing the amounts paid, whether to an individual or an organization.

The third figure to be determined is the one which requires some calculation. Basically, the rules governing the deduction of child care expenses impose a maximum deduction per child per year (referred to as the “basic limit”), with that basic limit dependent on the age and health of the particular child.

For 2025, the following overall limits apply:

• $5,000 in costs per year for a child who was born in 2009 to 2018;
• $8,000 in costs per year for a child who was born after 2018;
• $11,000 in costs per year for a child who was born in 2025 or earlier and for whom the disability tax credit can be claimed. 

Take, for example, a two-income family in which one spouse earns $70,000 and the second spouse earns $56,000. They have two children, aged 4 (born in 2021) and aged 8 (born in 2017). Neither is disabled. The 4-year-old attends day care five days a week and the 8-year-old goes to an after-school program each weekday.

During 2025, the family incurred $6,000 in day care costs for the younger child and $4,000 in costs for after-school care for the older child.

All eligible child care costs incurred must be claimed by the lower income spouse, who earned $56,000 during 2025. In order to determine the amount which can be claimed for each child, it’s necessary to determine the basic limit for that child, based on their age, as follows.

• the basic limit for the 4-year-old (who was born after 2018) is $8,000, and so the entire $6,000 in day care costs incurred can be deducted.
• the basic limit for the 8-year-old (who was born between 2009 and 2018) is $5,000, and so once again the entire $4,000 incurred in costs for after-school can be deducted.

Finally, the overall limit for purposes of the child care expense deduction is two-thirds of earned income of the lower-income spouse, meaning that the maximum claim which can be made for 2025 is $37,296 (66.6% of $56,000), well in excess of the actual costs incurred.

The total deduction available for child care expenses incurred for the 2025 tax year will therefore be $10,000. That deduction is claimed on Line 21400 of the tax return filed by the lower-income spouse for the year, reducing their taxable income from $56,000 to $46,000, and resulting in a federal tax savings of $1,450. A similar tax deduction is claimed as well for provincial tax purposes; the amount of provincial tax saved will depend on the tax rates imposed by the province in which the family lives.

Parents wishing to find out more about the child care expense deduction, and perhaps to calculate the maximum deduction which will be available to them for the 2025 tax year, should consult Form T778 E (25). The form is currently on the CRA website and can be found at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t778.html.

Very few Canadians look forward to the annual chore of completing and filing their income tax return, and that experience isn’t improved by finding out, once the return is completed, that additional tax amounts are owed to the CRA. Unfortunately, that’s an experience that millions of Canadians will have over the next month or so. While most tax return filings result in payment of a refund to the taxpayer, that’s not always the case. This year, of the returns filed by March 22, 2026, just over a million of those returns resulted in additional tax owed on filing by the individual tax filer. And while that number represents a very small percentage of total returns filed, that’s little consolation for the taxpayers who find themselves in that unhappy position.

Very few Canadians look forward to the annual chore of completing and filing their income tax return, and that experience isn’t improved by finding out, once the return is completed, that additional tax amounts are owed to the CRA. Unfortunately, that’s an experience that millions of Canadians will have over the next month or so. While most tax return filings result in payment of a refund to the taxpayer, that’s not always the case. This year, of the returns filed by March 22, 2026, just over a million of those returns resulted in additional tax owed on filing by the individual tax filer. And while that number represents a very small percentage of total returns filed, that’s little consolation for the taxpayers who find themselves in that unhappy position.

Finding out that additional tax amounts are owed usually comes as a surprise to the taxpayer and consequently is almost never something that they have budgeted or planned for. The worst-case scenario, for all taxpayers, is to find out that they are faced with a large tax bill and an imminent payment deadline, and that they just don’t have the funds needed to make the required payment by that deadline. This year, that payment deadline is Thursday April 30, 2026 for ALL individual taxpayers (including self-employed taxpayers and their spouses, notwithstanding the fact that such taxpayers have until Tuesday June 16, 2026 to file their 2025 tax return).

The April 30 payment deadline is inflexible and, where payment in full is not made on or before that date, interest charges on any unpaid balance will be levied by the CRA beginning on May 1, 2026. Interest charges levied by the CRA tend to add up quickly, for two reasons. First, the interest rate charged by the CRA on outstanding tax amounts is, by law, higher than current commercial rates – the rate charged from April 1 to June 30, 2026 is 7.0%. Second, interest charges levied by the CRA are compounded daily, meaning that each day interest is levied on the previous day’s interest charges. It is for these reasons that a taxpayer is, where at all possible, likely better off arranging private borrowing – for example, through a line of credit or low-interest credit card – in order to pay any taxes owing by the April 30, 2026 deadline.

Where the taxpayer can’t pay their tax bill out of current resources and is unable to borrow the funds to do so, there is another option. Like most creditors, the CRA would rather get paid on time and in full, but the Agency’s ultimate goal is to collect the full amount of taxes owed. If a tax bill can’t be paid on time, in full or in part, the CRA is open to making a payment arrangement with the taxpayer, providing them with the option of paying an amount owed over time, plus interest.

There are three options available to taxpayers who want to propose such a payment arrangement. The first is a call to the CRA’s automated TeleArrangement service at 1-866-256-1147. When making such a call, it is necessary for the taxpayer to provide their full name and address, social insurance number, and date of birth, and to have the Notice of Assessment for the last tax return for which the taxpayer filed. For taxpayers who are up to date on their tax filings, that will be the Notice of Assessment for the return for the 2024 tax year. The TeleArrangement Service is available Monday to Friday, from 7 a.m. to 10 p.m., Eastern time.

Taxpayers who would rather speak directly to a CRA employee can call the Agency’s debt management call centre at 1-888-863-8657 from 8 a.m. to 8 p.m. Eastern Time Monday to Friday. Where there is a long wait time, the taxpayer can request that a CRA representative return the call, or can complete an online form (available at https://apps.cra-arc.gc.ca/ebci/iesl/showClickToTalkForm.action) requesting a callback from a CRA agent.

Finally, taxpayers who have registered for the CRA’s online service My Account can also log into their account to schedule a series of pre-authorized debits from their bank account to discharge their tax debt. My Account is available on the CRA website at https://www.canada.ca/en/revenue-agency/services/e-services/cra-login-services.html.

Finally, regardless of the taxpayer’s circumstances, there is one strategy which is in all circumstances the wrong choice. Taxpayers who can’t pay their tax bill by the deadline sometimes conclude that there is no point in filing if payment can’t be made. That’s the wrong decision, and potentially a very costly one. Where an amount of tax is owed and the return isn’t filed on time, there is an immediate late filing penalty imposed equal to 5% of the outstanding tax amount – and interest charges start accruing on that penalty amount (as well as on the outstanding tax balance) immediately. For each full month that the return isn’t filed, a further penalty of 1% of the outstanding tax amount is charged, to a maximum of 12 months. Higher penalty amounts are charged, for a longer period, where the taxpayer has incurred a late-filing penalty within the past three years. In the worst-case scenario, the total penalty charges can reach 50% of the tax amount owed – and that doesn’t count the compound interest which is levied on all penalty amounts, as well as on all unpaid taxes. In all cases, no matter what the circumstances, the right answer is to file one’s tax return on time and, where necessary, contact the CRA to make an arrangement to pay tax amounts owed over time.

Detailed information on the options available to taxpayers who can’t pay their taxes on time and in full can be found on the CRA website at  Call us if you can't pay in full or on time - Debt collection at the CRA - Canada.ca and https://www.canada.ca/en/revenue-agency/services/payments-cra/payment-arrangements.html.

2025 was a busy year in Canadian politics. In addition to the general federal election, elections were held in two provinces (Ontario and Newfoundland) and two of the territories (Nunavut and Yukon Territory). In addition, there were no fewer than thirteen by-elections and eleven leadership contests, for different political parties, at both the federal and provincial/territorial levels.

2025 was a busy year in Canadian politics. In addition to the general federal election, elections were held in two provinces (Ontario and Newfoundland) and two of the territories (Nunavut and Yukon Territory). In addition, there were no fewer than thirteen by-elections and eleven leadership contests, for different political parties, at both the federal and provincial/territorial levels.

Whether it’s a leadership contest, a by-election, or a general election at the federal, provincial, or territorial level, votes are needed in order to win. And to run the leadership or election campaigns needed to garner those votes, candidates need an organization, volunteers, and money – a lot of money. Particularly in a general federal election, the major political parties needed to raise and spend millions of dollars, and the task of raising that money is undoubtedly made somewhat easier by the fact that a tax credit exists to help offset the out-of-pocket cost to potential donors.

Individuals who donated money to the political party or candidate of their choice during 2025 may or may not be happy with the outcome of an election or leadership contest, but no matter which registered party or candidate they donated to, donors may be able to claim a federal and a provincial or territorial tax credit for that donation when they file their returns for the 2025 tax year.

Federally, the political contribution tax credit is available with respect to funds contributed to either a registered political party or to candidates running in a federal election. Contributions can be made at any time, not just during an election campaign, as long as the donation is received by an official candidate or by a registered federal political party or association.

While the parties which currently hold seats in the House of Commons are, of course, the most well known, there were in fact 16 political parties registered and in good standing with Elections Canada at the time of the 2025 federal general election; a listing of those parties can be found on the Elections Canada website at  https://www.elections.ca/content.aspx?section=ele&dir=pas/45ge/pollim&document=index&lang=e.

Contributions to any one of these registered parties, within prescribed limits, will qualify for the federal political contribution tax credit. And, where a qualifying contribution is made, an official receipt must be issued in order for the contributor to claim that tax credit.

The federal political contribution tax credit is calculated as a percentage of donations given, with the credit percentage decreasing as contributions amounts increase. The credit percentages allowed for different contribution levels are as follows:

The maximum credit claimable in any taxation year by a single taxpayer is $650, meaning that the maximum credit obtainable is reached once contribution levels reach $1,275.

Unlike some other tax credit measures, the rules governing the political contribution tax credit do not permit political contributions eligible for the credit to be carried over and claimed in any previous or subsequent tax year. Consequently, all such contributions made can only be claimed on the return for the year in which those contributions were made. As well, where such contributions exceed $1,275 in any one taxation year, no tax credit can be claimed on any “excess” contributions, in either the current or any previous or subsequent tax year.

Each of the provinces and territories also provides a tax credit for political contributions made. The rules on which types of contribution are eligible for that credit, and how the credit is calculated, will differ for each jurisdiction. Information on the political contribution tax credit for the provinces and territories which held general elections in 2025 can be found on the following websites: 

• Ontario https://www.ontario.ca/page/political-contribution-tax-credit-individuals;
• Newfoundland and Labrador https://www.gov.nl.ca/fin/tax-programs-incentives/personal/politicalcontributions/;
• Yukon https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package/yukon/5011-pc.html#h-4;
• Nunavut https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package/nunavut/5014-pc.html

Many Canadians who are committed to a particular political party or candidate volunteer their time during a nomination or election campaign – canvassing for the candidate, putting up election signs, or telephoning voters to encourage them to vote for the candidate. However, in such cases, the work must be its own reward, as no income tax receipts can be issued for most such non-monetary contributions, and consequently no credit can be claimed for the value of any non-monetary contribution (including volunteer hours) donated.

Information on the federal political contribution tax credit, as well as the credit claimable in each of the provinces and territories, can be found on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/federal-political-contributions-line-40900-total-contributions-line-41000-tax-credit.html, https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/provincial-territorial-tax-credits-individuals.html, and https://www.revenuquebec.ca/en/citizens/income-tax-return/completing-your-income-tax-return/how-to-complete-your-income-tax-return/line-by-line-help/400-to-447-income-tax-and-contributions/line-414/.

Fortunately for Canadian taxpayers, most individual income tax returns filed with the Canada Revenue Agency result in payment of a tax refund to the taxpayer. Last year, out of nearly 34 million returns filed, just over 19 million resulted in payment of a refund to the taxpayer, with the average refund being $2,000. Just over 8 million taxpayers owed money on filing to the CRA, and the remainder of returns were nil returns, resulting in neither tax owing nor payment of a refund.

Fortunately for Canadian taxpayers, most individual income tax returns filed with the Canada Revenue Agency result in payment of a tax refund to the taxpayer. Last year, out of nearly 34 million returns filed, just over 19 million resulted in payment of a refund to the taxpayer, with the average refund being $2,000. Just over 8 million taxpayers owed money on filing to the CRA, and the remainder of returns were nil returns, resulting in neither tax owing nor payment of a refund.

The minority of taxpayers who are assessed as having tax owing have a lot of options when it comes to the available methods by which such tax can be paid, but no choice at all when it comes to the deadline by which such payment must be made. In all cases, individual income tax owed by a taxpayer for a tax year must be paid on or before April 30 of the following year. This year, that means any balance of income tax owed for the 2025 tax year must be paid on or before Thursday April 30, 2026. No exceptions and, absent unusual circumstances, no extensions.

Failing to pay one’s tax bill in full and on time can result in a significant financial cost, as the result of the CRA’s practices and policies with respect to interest charges. Interest will be levied on any outstanding amount owed for the 2025 tax year beginning on May 1, 2026. By law, the CRA charges interest at rates which are higher than current commercial rates. For the second quarter of 2026 (April 1 – June 30) the interest rate charged on overdue or insufficient tax amounts owed is 7%, and all such interest charges are compounded daily, meaning that each day interest is charged on interest levied on the previous day.

Just as it’s in the taxpayer’s interest to pay tax amounts owed on or before the April 30 payment deadline, it’s also very much in the CRA’s interest to make paying taxes as simple and straightforward as it can be. To that end, the Agency offers individual taxpayers a wide range of choices when it comes making that payment. This year there are no fewer than eleven separate options available to individual residents of Canada in paying their taxes for the 2025 tax year. The rules and procedures for the methods most frequently used by individual taxpayers are outlined below: the first four options involve payment by electronic means, while the last three describe those available to taxpayers who would prefer to make their payments in person, or by sending a cheque to the CRA.

Pay using online banking

Millions of Canadians transact most or all of their banking using the online services of their particular financial institution. The list of financial institutions through which a payment can be made to the Canada Revenue Agency is a lengthy one (available at Pay online with your bank or credit union - Payments to the CRA - Canada.ca), and includes all of Canada’s major banks and credit unions.

The specific steps involved in making that payment will differ slightly for each financial institution, depending on how their online payment systems are configured. What’s important to remember is that the nature of the payment – i.e., tax balance owed on filing, as distinct from current year tax instalment payments – must be specified, and the taxpayer’s social insurance number must be provided, in order to ensure that the payment is credited to the correct account, for the correct taxation year.

It’s not necessary to access any particular CRA form in order to make an online payment of taxes through one’s financial institution.

Using the CRA’s My Payment

The CRA also provides an online payment service called My Payment. There is no fee charged for the service, and it’s not necessary to be registered for any of the CRA’s other online services in order to use My Payment.

What is necessary is that the taxpayer have an activated debit card with a VISA Debit or Debit MasterCard logo from a participating Canadian financial institution, as My Payment is set up to accept payment using only those cards. It’s not possible to use a credit card to make a payment on My Payment; in addition, cards bearing only the Interac Debit logo, which were formerly eligible, have not been accepted for purposes of My Payment since September 2024.

Anyone intending to use My Payment should also confirm that the amount of any payment to be made is within any transaction limits imposed by their particular financial institution.

A list of participating financial institutions for each type of card, and more details on this payment method, can be found at https://www.canada.ca/en/revenue-agency/services/e-services/payment-save-time-pay-online.html.

Payment by credit card, PayPal, or Interac e-transfer

While it’s possible to pay one’s taxes using a credit card, PayPal, or Interac e-transfer, such payments can be made only through third-party service providers (that is, payments by those methods cannot be made directly to the Canada Revenue Agency), and such third-party service providers will impose a fee for the service.

There are currently only three service providers through which individual income tax amounts owed can be paid – Pay Simply, Plastique, and TelPay – and each such service provider offers different payment methods. Links to each such service are available at https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/pay-credit-card.html.

Payment by pre-authorized debit

It’s possible to set up a pre-authorized debit (PAD) arrangement with the CRA, authorizing the Agency to debit a specific bank account for an amount of taxes owed, on dates specified by the taxpayer.

Individuals who make instalment payments of tax throughout the year may already have such an arrangement in place and can certainly use that existing arrangement to schedule a PAD of any balance of taxes owed for the 2025 tax year. However, any such payments must be scheduled at least five business days before the date the payment is to be made – i.e., April 30, 2026. A taxpayer who makes a payment of taxes only once a year is likely better off using another of the available payment methods.

There is also another option for taxpayers who have their return prepared and E-FILED by an authorized electronic filer. Such taxpayers can have that E-FILER set up a PAD agreement on their behalf in order to make a “one-time” payment for a current year tax amount owed. Such an arrangement is only for the payment of a current year tax balance and can’t be used for other payments like instalment payments of tax. Details on how to set up a pre-authorized debit arrangement, whether for a single payment or for recurring payments, are outlined on the CRA website at https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/pay-authorized-debit.html.

Paying in person at your financial institution

For those who don’t use online banking, or simply prefer to make a payment in person, it’s possible to pay a tax amount owed at a bank or credit union. Doing so, however, requires that the taxpayer have a specific remittance form – the T7DR, Amount owing Remittance Voucher.

It’s possible to download and print that remittance form from the CRA website. Instructions on how to do so can be found on the website at https://www.canada.ca/en/revenue-agency/services/forms-publications/request-payment-forms-remittance-vouchers.html.

Paying at a Canada Post outlet

All Canada Post outlets can receive payments of individual income tax balances owed, in cash or by debit card, but will charge a fee for doing so. A specific form is needed to make tax payments at Canada Post outlets.

For such payments, the taxpayer must have a QR code which contains the information needed for the CRA to credit the amount paid to the taxpayer’s account.

While a QR code is sometimes included on remittance forms sent to the taxpayer by the CRA, it’s also possible to generate a QR code online through the CRA website. A link to instructions on how to do so can be found on that website at https://www.canada.ca/en/revenue-agency/corporate/about-canada-revenue-agency-cra/pay-canada-post.html.

Paying by cheque

While it’s not as common anymore, it’s still possible to pay any tax balance owed on filing by cheque, as outlined on the CRA website at https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/pay-cheque.html.

Such cheques are made payable to the Receiver-General for Canada and are mailed, together with the required remittance voucher, to the Canada Revenue Agency, using the address found on the CRA website. As is the case with payments made at a financial institution, the taxpayer can print such a remittance form from the CRA’s website. Instructions on how to do so can be found at https://www.canada.ca/en/revenue-agency/services/forms-publications/request-payment-forms-remittance-vouchers.html.

Even where the taxpayer does not have a remittance form, it’s possible to pay taxes owed by cheque. The CRA suggests that, where payment of taxes owed is made by cheque, the taxpayer should include their social insurance number on the memo line found on the front of the cheque and, in addition, provide information about the tax account (that is, 2025 income tax balance owed on filing) to which the payment should be applied. Alternatively, that information can be provided on a separate piece of paper sent in the same envelope as the cheque. Taking these steps will help ensure that the payment is credited to both the correct taxpayer and the correct tax account of that taxpayer.

A decision on what method to use to pay one’s taxes includes another very important consideration of which most taxpayers are unaware. Under longstanding Canada Revenue Agency policy, the CRA considers that a payment is actually made on the date on which it is received by the Agency. However, depending on the payment method chosen, that date of receipt usually isn’t the same day the payment is made by the taxpayer, and it can be as much as several days later. And, of course, where payment is made close to the payment deadline, that delay can mean the difference between a timely payment and one that is late and incurs interest charges.

Helpfully, the Canada Revenue Agency provides information, for each payment method, on both which types of tax payments can be made using that method and how the date of receipt is determined for that particular method. That information can be found on the CRA’s website at Canada Revenue Agency https://www.canada.ca/en/revenue-agency/services/payments-cra/individual-payments/make-payment.html.

Finally, once payment has been made, by any payment method, the CRA provides taxpayers with an online method for confirming that a payment has been received and applied to the taxpayer’s account, through the Agency’s My Account service. That service is available at https://www.canada.ca/en/revenue-agency/services/payments-cra/confirm-payment.html. Taxpayers who have not signed up for My Account can confirm that their payment has been received and applied to their 2025 tax account by calling the CRA’s Individual Income Tax Enquiries line, where an automated service at 1-800-959-8281, option 4, can provide that information.

Two quarterly newsletters have been added – one dealing with personal issues, and one dealing with corporate issues.

Two quarterly newsletters have been added – one dealing with personal issues, and one dealing with corporate issues.

They can be accessed below.

Corporate:

Issue #75 Corporate

Personal:

Issue #75 Personal

When Canadians sit down to prepare the tax return for the 2025 tax year, the forms they use will appear to most taxpayers to be identical to the ones completed at this time last year. That appearance is deceptive, as the tax return form is never the same from one year to the next. In some cases, the change is one which happens each year – the increase in taxable income brackets and tax credit amounts resulting from the indexing of those amounts for inflation. Those changes are built into the figures which appear in the return form, and the taxpayer doesn’t need to do anything in order to benefit from such changes when completing and filing the return.

When Canadians sit down to prepare the tax return for the 2025 tax year, the forms they use will appear to most taxpayers to be identical to the ones completed at this time last year. That appearance is deceptive, as the tax return form is never the same from one year to the next. In some cases, the change is one which happens each year – the increase in taxable income brackets and tax credit amounts resulting from the indexing of those amounts for inflation. Those changes are built into the figures which appear in the return form, and the taxpayer doesn’t need to do anything in order to benefit from such changes when completing and filing the return.

That’s not necessarily the case for other tax changes. Each year, new tax measures are introduced. In addition, the rules on the computation of income can be changed and existing tax deductions and credits can be extended, changed, or withdrawn altogether. In such cases, it’s up to the taxpayer to make sure that income is accurately reported and a claim is made for every deduction and credit available under the current rules – and conversely, to ensure that claims are not made for deductions or credits for which the taxpayer is not eligible for 2025.

At the beginning of tax filing season, the Canada Revenue Agency (CRA) posts information on its website to alert taxpayers to the substantive tax changes which they will find when completing their tax return, as well as any changes made to the Agency’s administrative policies and practices which could affect taxpayers who are filing their return for 2025. Such information is also highlighted in the General Income Tax and Benefit Guide for 2025. This year, the substantive tax changes made are relatively narrow and technical in nature, affecting only taxpayers who do specific types of work, or who have specific living or health circumstances, or those who make particular types of investments. Most of this year’s changes relate to tax administration – the policies and procedures which govern the completion and filing of returns for 2025.

The changes to such administrative policies and procedures include the following.

Changes to EFILE

Most Canadian taxpayers do not prepare and file their own returns. During last year’s filing season, 60% of returns were filed using EFILE, a system in which an accredited EFILER prepares a taxpayer’s return and files it electronically with the CRA on the taxpayer’s behalf. (Individual taxpayers can also prepare and file their own tax returns electronically, but such filings are done using the CRA’s NETFILE service.)

To properly prepare and EFILE a return, the EFILER needs to have access to the information found in the taxpayer’s online tax CRA account. In previous filing seasons, such access could be gained using the “Authorize a Representative” function found in EFILE software for individuals.

That was changed beginning July 15, 2025, and an EFILER can no longer use EFILE software to request access to another taxpayer’s online tax account. Instead, EFILERS must request such online access through the “Represent a Client” function on the CRA website, and the access will be provided only once the taxpayer confirms it within their CRA account.

More information on changes to the CRA’s processes for naming and authorizing a representative can be found at https://www.canada.ca/en/revenue-agency/services/tax/representative-authorization/confirm-representative.html#individual.

Regaining access to a CRA account

For good reason, the online CRA accounts of taxpayers are protected by multiple levels of security. To access their accounts, taxpayers must enter a UserID and password. As well, at the time the taxpayer is logging in, they are sent a one-time six-digit numeric code as part of the Agency’s Multi-Factor Authentication requirement, and must enter that code.

Most taxpayers don’t log into their online CRA accounts that frequently, and so it’s not that unusual for a taxpayer to forget or mislay their login information. As well, if a taxpayer inputs the incorrect User ID or password too many times in an attempt to get it right, their online account will be locked and therefore inaccessible.

In previous years, taxpayers who were locked out of their CRA online accounts or simply forgot their login information had to call the CRA to re-establish access – a process which could take some time, especially during tax filing season.

The CRA has now instituted a self-service option which enables taxpayers to regain access to their online account where they have forgotten or misplaced their log-in credentials, have been locked out of their account, or simply want to change their sign-in options. Information on how to do that is available on the CRA website at https://www.canada.ca/en/revenue-agency/services/e-services/cra-login-services/help-cra-sign-in-services/cra-userid-password.html#section3.

Change in marital status during 2025

The marital status of a taxpayer has a significant effect on the types of tax deductions and credits for which they may be eligible. Generally speaking, where a taxpayer is married (or living common-law) their eligibility, especially for tax credit or benefit programs like the Goods and Services/Harmonized Sales Tax Credit or the Canada Child Benefit, is determined, in part, by the combined income of both spouses, and is not based on individual income. As well, the ability to claim personal tax credits, like the spousal tax credit, or to make a spousal registered retirement savings plan contribution, depends on the taxpayer having a spouse at the end of the tax year.

Consequently, a change in marital status usually has an effect on one’s eligibility for a variety of tax deductions and credits and the ability to engage in particular tax planning strategies. The CRA’s listing of income tax changes for 2025 includes a reminder that taxpayers are required to inform the CRA of a change in marital status by the end of the following month after that status has changed. Where a taxpayer’s marital status changed during 2025, they must enter the date of the change on page 1 of the tax return. Taxpayers who must do so should be aware that the CRA will recalculate benefits and credits received based on the new marital status, which could mean either increased or decreased eligibility for benefits and credits.

One final point – while the general rule is that a change in marital status must be communicated to the CRA by the end of the month following the month of the change, that’s not the case where a couple separates. A separation does not generally exist (for tax purposes) until the spouses have lived separate and apart for 90 days, as the result of a breakdown in their relationship. Once that 90-day separation period has passed, the taxpayer must inform the CRA that they are now separated, and the effective date of that separation, for tax purposes, will be the date the spouses began living apart.

When it comes to substantive changes to tax rules for 2025, the only change which will affect all taxpayers is a reduction in the tax rate applied to the first income tax bracket (for 2025, income up to $57,375). Effective as of July 1, 2025, that rate was reduced from 15.0% to 14.0%. Because the change took effect mid-year, the effective tax rate for 2025 on the first income bracket is 14.5%. As with changes in tax bracket and tax credit amounts, the tax rate reduction is built into the tax return form (or tax return software), and there’s no need for the taxpayer to do anything to benefit from the change.

That’s not the case for other substantive changes to the tax system which took effect in 2025. Those changes are relatively technical and narrow in effect, but should be noted by the taxpayer groups who are affected by them. A listing of such changes, with links to the information provided by the CRA on the nature and effective date of those changes, is set out below.

• Capital gains deduction for qualifying business transfers or qualfying cooperative conversions
• Capital gains rollover for small business shares
• Expansion of the critical mineral exploration tax credit
• Disability supports deduction
• Mineral exploration tax credit
• Northern residents deductions
• Return of fuel charge proceeds to farmers tax credit

For those using the Income Tax and Benefit Guide for 2025 in completing their return, each of these changes is highlighted in the Guide.

Most taxpayers don’t sit down to prepare their tax return for the 2025 tax year – or meet with a tax preparer to get that return done – before early in the month of March, after T4 slips have been received from their employer and the CRA’s online filing services are up and running for 2025 returns. Unfortunately, by that time, the most significant opportunities to reduce or minimize the tax bill for 2025 are no longer available. Almost all such tax planning or saving strategies, in order to be effective for 2025, must have been implemented by the end of that calendar year and the deadline for the last such major tax saving opportunity – making an RRSP contribution – was March 2, 2026.

Most taxpayers don’t sit down to prepare their tax return for the 2025 tax year – or meet with a tax preparer to get that return done – before early in the month of March, after T4 slips have been received from their employer and the CRA’s online filing services are up and running for 2025 returns. Unfortunately, by that time, the most significant opportunities to reduce or minimize the tax bill for 2025 are no longer available. Almost all such tax planning or saving strategies, in order to be effective for 2025, must have been implemented by the end of that calendar year and the deadline for the last such major tax saving opportunity – making an RRSP contribution – was March 2, 2026.

The fact that the clock has run out on most major tax planning opportunities for 2025 doesn’t, however, mean that there are no tax-saving strategies left. At this point, there are a couple of ways to minimize the tax hit for 2025 – by claiming all available deductions and credits on the return, and also by making sure that those deductions and credits are structured and claimed in the way which will give the taxpayer the greatest tax benefit.

In some cases, a claim for a tax deduction or credit can only be made on the return for the year in which the expense is incurred, while in other cases claims can be made for expenses incurred in the previous tax year, or even as far back as five years previously.  In other cases, the availability and the amount of a tax deduction or credit which can be claimed depend, in whole or in part, on the income (and tax payable) of the taxpayer making the claim.

Getting the best tax result on one’s return requires an assessment of which deductions and credits are available to claim in the current year, whether claims to be made by each spouse can be combined on a single return, whether some or all credit and deduction claims can be carried forward and claimed in a future year (or claimed in the current year by another family member), and whether it even makes sense to make the claim. To most taxpayers, it would seem that the logical approach, and the one guaranteed to create the best tax result, would be to claim every available deduction and credit as soon as it is available and to the maximum extent possible. It may seem counterintuitive, or even illogical, to not do so, but in some cases (albeit for different reasons) there are situations in which it makes sense to defer an available claim to a future year, or to transfer the claim to another family member.

Those considerations apply to two of the most common tax credit claims made by Canadian taxpayers – the charitable donation tax credit and the medical expense tax credit, and the decision on how to structure such claims doesn’t need to be made until the tax return for the year is prepared.

Charitable donation tax credit

Taxpayers are entitled to make a claim on the annual tax return for charitable donations made in the current (that is, 2025) year or any of the previous five years. The reason it can sometimes make sense not to claim a charitable donation in the year it was made arises from the way in which the charitable donations tax credit is structured in order to encourage higher donations.

For most taxpayers that credit, at both the federal and provincial/territorial levels, is a two-tier credit. Federally, the first $200 in donations receives a credit of 14.5% of the total donation, or $29. However, donations above the $200 level receive a credit equal to 29% of the donation amount over $200. (There is a third-level donation credit percentage of 33%, but that is available only to the minority of taxpayers whose taxable income for 2025 is over $253,414.)

Take, for example, a taxpayer who makes a regular contribution to a favourite charity of $100 each month, or $1,200 per year. Where they claim that donation on the annual return for 2025, that claim will result in a federal tax credit of $319 ($200 times 14.5%, plus $1,000 times 29%). Where, however, the same taxpayer defers the claim to the following year and claims a total of $2,400 in donations on a single return, they will receive a federal credit of $667 ($200 times 14.5%, plus $2,200 times 29%). Where the donations are accumulated and claimed once every five years, the federal credit received will be $1,711 ($200 times 14.5%, plus $5,800 times 29%). Under each scenario, the total charitable donation made is the same, but the amount of credit received increases with each year that the claim is deferred. Since each of the provinces and territories provide a two-tier credit (at different rates, depending on the jurisdiction), the same result will be seen when calculating the provincial/territorial credit.

As well, charitable donations made by either spouse can be combined and claimed on the return for one of those spouses, thereby increasing the amount of charitable donations available to claim and possibly the amount of credit which can be received.

It’s important, as well, to remember that the charitable donation tax credit is a non-refundable credit, meaning that it can reduce tax payable but cannot create, or increase, a refund. Consequently, in deciding which spouse will make the claim for the credit for charitable donations made by both spouses, it’s necessary to make sure that that spouse has tax payable for the year of at least the amount of the available charitable donation tax credit. Any credit amount in excess of tax payable for the year cannot be claimed and is simply lost.

Medical expenses

Notwithstanding our publicly funded health care system, there are a great (and increasing) number of medical and para-medical expenses for which coverage is not provided and which must be paid on an out-of-pocket basis. In many instances, it’s possible to claim a medical expense tax credit for those out-of-pocket costs.

For 2025, the federal credit for such expenses is 14.5% of allowable expenses. As is usually the case, the provinces and territories also provide a credit for the same expenses, albeit at different rates.

Many taxpayers, with some justification, find the rules on the calculation of a medical expense tax credit claim confusing. First, there is an income threshold imposed. Medical expenses eligible for the credit are qualifying expenses which exceed 3% of net income, or (for 2025) $2,834, whichever is less. Put more practically, for 2025, taxpayers who have net income of $94,467 or more can claim medical expenses incurred over $2,834. Those with lower incomes can claim medical expenses which exceed 3% of that lower net income. For instance, a taxpayer having $35,000 in net income could claim qualifying medical expenses incurred over $1,050 (3% of $35,000).

The other aspect of the medical expense tax credit which can be confusing is the calculation of the optimal time period. Unlike most tax credit claims, the medical expense tax credit can be claimed for qualifying expenses which were paid in any 12-month period ending during the tax year. While confusing, such rule is beneficial, in that it allows taxpayers to select the particular 12-month period during which medical expenses (and therefore the resulting credit claim) is highest. The only restrictions are that the selected 12-month period must end during the calendar year for which the return is being filed, and, of course, any expenses which were claimed on a previous return cannot be claimed again. 

While only expenses which exceed the $2,834/3% threshold may be claimed, it’s also possible to aggregate expenses incurred within a family and make a single claim for those expenses on the return of one spouse. Specifically, the rules allow families to aggregate medical expenses incurred for each spouse and for each child who was under the age of 18 at the end of 2025. While medical expenses incurred by a single family member might not be enough to allow them to make a claim, aggregating those expenses can mean (especially for a family that does not have private medical insurance coverage) that total expenses will exceed the applicable threshold.

In determining who will make the medical expense tax credit claim for a family, there are two points to remember. Since total medical expenses claimable are those which exceed the 3% of net income/$2,834 threshold, whichever is less, the greatest benefit will be obtained if the spouse with the lower net income makes the claim for total family medical expenses. However, like the charitable donation tax credit, the medical expense credit is a non-refundable one, meaning that it can reduce tax otherwise payable, but cannot create (or increase) a refund. Therefore, it’s necessary that the spouse making the claim have tax payable for the year of at least as much as the credit to be obtained, in order to make full use of that credit.

Finally, the number and variety of medical expenses which an individual or family might have to pay for out of pocket are almost limitless, and the rules governing which can be claimed and in what circumstances are very specific and, often, not necessarily intuitive. In some cases, for instance, a doctor’s prescription will be required, while in others it will not. The very long list of medical expenses eligible for the credit, and any ancillary requirements, such as obtaining a prescription from a medical professional, can be found on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/lines-33099-33199-eligible-medical-expenses-you-claim-on-your-tax-return.html.

For most Canadians, interactions with the Canada Revenue Agency (CRA) are few and far between. In the vast majority of cases, taxpayers file a tax return each spring and either pay any tax amount owed or (in most cases) receive a refund and do not hear from or have reason to contact the Agency again until the next tax filing season. However, especially during tax season, and for the few months after the general filing deadline of April 30, there are a number of additional (legitimate) reasons why the CRA might get in touch with individual taxpayers.

For most Canadians, interactions with the Canada Revenue Agency (CRA) are few and far between. In the vast majority of cases, taxpayers file a tax return each spring and either pay any tax amount owed or (in most cases) receive a refund and do not hear from or have reason to contact the Agency again until the next tax filing season. However, especially during tax season, and for the few months after the general filing deadline of April 30, there are a number of additional (legitimate) reasons why the CRA might get in touch with individual taxpayers.

Unexpected communications of any kind from the tax authorities are generally stressful for taxpayers, who often fear the worst. Such anxiety often leads taxpayers to respond quickly to whatever request is being made, but that’s not the right response. Any unsolicited communication from the CRA should first prompt the taxpayer to verify that such communication is, in fact, legitimate and not part of a fraud or scam to part the taxpayer from their money.

Such frauds and scams aren’t new, but they are becoming both more numerous (there are currently warnings about 18 separate tax and benefit scams listed on the Agency’s website, and there are undoubtedly more which have not yet come to light) and more successful. The reasons why lie, for the most part, in changes in technology and in how we now communicate on personal, business, and tax matters. Most Canadians now carry out most of their communications using technology that didn’t exist a generation or two ago. The sheer volume of such communications, and especially the fact that providing a more or less instant response has become the norm, has made scams and frauds much easier to carry out. A fraudster who sends out thousands of fraudulent text messages asking the recipient to click on a link which then provides access to that individual’s personal or banking information needs to succeed in only a few instances in order to make the fraud profitable. Adding to the risk is the fact that the CRA, as part of its move toward online and electronic communication with taxpayers, now utilizes nearly every available form of e-communication. The CRA contacts taxpayers by phone call, automated voice message, letter, text message, email, and online (through its website service My Account). About the only forms of communication that the CRA doesn’t use are social media sites like What’sApp and Facebook Messenger. And now, Generative AI has enhanced the ability of even unsophisticated scammers to produce communications purportedly from the CRA which are harder and harder to distinguish from the real thing.

It’s clear, from all of this, that the first response to any communication received from the CRA should be to NOT respond until that communication can be verified as authentic. And while that’s not always easy to do, there are practices which, if followed, can minimize the risk – and other practices which should always be avoided.

No matter the form of communication, or how urgent or time-sensitive that communication claims to be, taxpayers should NEVER:

• Provide or share any personal or financial information, whether over the phone, by text, by email, or on a website, to any person or organization claiming to be from the CRA (even if call display on a phone call indicates that the person is calling from a number belonging to the Agency, as such phone numbers can be spoofed). Taxpayers who receive an unsolicited phone call from someone claiming to be from the CRA can ask the caller for their name, office location, and a number at which they can be reached. It’s then possible to use a service on the CRA website to verify whether or not that callback number is, in fact, one used by the CRA. That service, called Verify a CRA number, can be found on the Agency’s website at https://www.canada.ca/en/revenue-agency/corporate/scams-fraud/verify-cra-contact.html. If the caller refuses to provide a name, office location, and callback number, it’s not the CRA calling.
• Click on any link (whether to a form or a website) contained in a text message or unsolicited email. While the CRA does use texts and emails to communicate, it does so only for very specific purposes. The CRA will send a text to a taxpayer only as part of its multi-factor authentication service used when the taxpayer is logging into their CRA account, and then only to provide a six digit one-time numeric code to be entered on the website. Any other kind of text is not from the CRA. Similarly, the Agency does send emails to taxpayers, but in only two specific circumstances: where the taxpayer has registered for email notifications and has a new message to view in their CRA online accounts, or where the taxpayer has asked, during a previous meeting or call with a CRA representative, that a CRA link to a form or publication be sent to the taxpayer by email.

Tax scams and frauds are generally successful for two reasons. First, the communications employed to carry out such scams and frauds are structured to be very similar to legitimate communications which could very well have come from the CRA. For instance, the CRA does contact taxpayers, as part of its return verification program, to request that the taxpayer provide proof of claims made on their return – for example, verification of amounts paid for childcare expenses. A taxpayer who receives a text message or email that looks legitimate and requests that they click on a link to confirm such amounts paid isn’t likely to jump first to the conclusion that the communication is fraudulent. Second, fraudulent communications very often inform the taxpayer that they are owed a tax refund by the CRA or are eligible for payment of a new government benefit or tax credit amount. It’s human nature to welcome receipt of unexpected income, and our tax and benefit system is sufficiently complex that most individuals wouldn’t be surprised to hear that they were eligible for refunds, benefits, or tax credits of which they were unaware, and don’t think to question it. Conversely, such fraudulent communications may tell the taxpayer that they owe money to the tax authorities and that significant interest and penalty charges will accrue unless and until payment in full is made. Often, the message includes sufficient dire warnings of the negative financial consequences of such debts (like garnishment of wages, damage to one’s credit rating, or even criminal charges) as to intimidate the taxpayer into making a quick payment, without taking the time to verify the authenticity of the request.

The best defence against becoming a victim of such tax scams and frauds is two-fold: first, never disclose personal or financial information in response to a communication of any kind which purports to be from the CRA, and never click on any link provided in a text or unsolicited email communication received (ostensibly) from the Agency. Where an unsolicited phone call is received, the taxpayer should follow the steps outlined above to verify the authenticity of the call and, if still uncertain, should call the CRA directly (using the Individual Income Tax Enquires line at 1-800 959-8281) to determine whether the call was, in fact, from the Agency. Where any communication is received containing a website link or address, the CRA’s advice is that the recipient should look up the official web address and then type it directly into a browser, and never click on the link. The CRA points out that many such links include a website address which is strikingly similar to real government website addresses, differing by only one or two characters, and leading the recipient to conclude that the communication is legitimate, when it is not.

The other defence against tax scams and frauds is to be aware of what the CRA does and does not do when communicating with taxpayers.

The CRA will not:

• Send refunds or payments by e-transfer or text message;
• Provide or accept payments by cryptocurrencies;
• Demand or pressure immediate payment by:
  • Interac® e-transfer,
  • Cryptocurrencies,
  • Prepaid credit cards,
  • Gift cards from any type of retailer;
• Threaten to deport or arrest you, or put you in prison;
• Use aggressive or threatening language;
• Set up an in-person meeting in a public location to collect a payment;
• Charge a fee to speak with a call centre agent;
• Ask for personal or financial information in a voicemail or email.

Any communication which includes any of these requests, threats, or actions is, by definition, fraudulent and should be ignored and/or deleted, without replying or clicking on any link.

Given all of the above, taxpayers can legitimately feel that they are at a significant disadvantage when it comes to not falling prey to a tax scam or fraud. However, avoiding that result is made much easier by remembering that there is NO legitimate communication from the CRA which requires a response within minutes or hours or even days. There is always time and opportunity to verify the source and legitimacy of any communication received, regardless of the method of communication. When money is lost to a tax scam or fraud, it is rarely recovered; avoiding immediate responses and taking the time to verify the authenticity of any communication which claims to be from the CRA will go a long way to ensure that the taxpayer doesn’t find themself in that unhappy position.

The CRA provides detailed information on its website on how to handle phone calls claiming to be from the Agency and on recognizing and avoiding tax scams and frauds. That information can be found at https://www.canada.ca/en/revenue-agency/corporate/scams-fraud/verify-cra-contact.html and at https://www.canada.ca/en/revenue-agency/corporate/scams-fraud/recognize-scam.html.

Canada’s tax system is a self-reporting one which depends almost entirely on the voluntary compliance of Canadian taxpayers. Almost every Canadian is required to complete and file a tax return annually and, while it’s likely that few of them look forward to doing so, the rate of voluntary compliance among Canadian taxpayers is actually very high. Last year, nearly 34 million individual income tax returns (for the 2024 tax year) were filed with the Canada Revenue Agency (CRA).

Canada’s tax system is a self-reporting one which depends almost entirely on the voluntary compliance of Canadian taxpayers. Almost every Canadian is required to complete and file a tax return annually and, while it’s likely that few of them look forward to doing so, the rate of voluntary compliance among Canadian taxpayers is actually very high. Last year, nearly 34 million individual income tax returns (for the 2024 tax year) were filed with the Canada Revenue Agency (CRA).

This year, most Canadian taxpayers are required to file a return for the 2025 tax year on or before Thursday, April 30, 2026. Self-employed taxpayers and their spouses, however, have until Monday, June 15, 2026 to file their returns for 2025.

It’s important to note that, regardless of the applicable tax return filing deadline, all Canadian individual taxpayers must pay any balance of tax owed for the 2025 tax year on or before Thursday April 30, 2026. There are no exceptions to this deadline and, absent very unusual circumstances, no extensions are possible. Where taxes owed for 2025 aren’t paid in full on or before the April 30, 2026 deadline, interest charges will begin to accrue beginning on May 1.

Interest charges levied by the CRA on unpaid tax amounts can be significant, for two reasons. First, by law, the prescribed interest rate levied by the Agency is higher than ordinary commercial rates. That prescribed interest rate is set quarterly and the applicable rate for the second calendar quarter of 2026 (April 1 to June 30) is 7%. Second, all interest charges levied by the CRA on unpaid tax amounts are compounded daily, meaning that on each successive day interest is levied on interest amounts that were charged for the previous day.

A summary of filing and payment due dates for returns for the 2025 tax year can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/important-dates-individuals.html.

In order to determine whether there will be a tax balance owed on filing for the 2025 tax year it is, of course, necessary to complete and file a return for 2025. And, while there is little to no flexibility with respect to the deadlines by which returns must be filed and tax amounts owing paid, taxpayers do have choices when it comes to how to get their tax return completed and filed.

For the vast majority of Canadian taxpayers, that means paying someone else to complete and file the return. Canada’s tax system has a well-deserved reputation for complexity, and it seems most Canadians feel either unable or unwilling to tackle the chore of completing their tax return themselves.

Most such Canadians choose to file their return for the year using the CRA’s EFILE service – last year, 60% of returns filed were filed through EFILE. Where a taxpayer chooses to file using EFILE, their return is filed online by a third party, who must be certified as an EFILER by the Canada Revenue Agency. Such EFILE services are provided by accountants, by tax preparation services which operate either year-around or only during tax filing season, or by tax discounters. Almost always, the E-FILE service provider also prepares the return which they are filing. 

Taxpayers who wish to use EFILE to file their return for the 2025 tax year can find information on using a tax return preparation service on the CRA website at https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/efile-individuals.html. That website also provides a current listing (searchable by postal code) of certified E-FILE service providers across Canada; the listing can be found at https://apps.cra-arc.gc.ca/ebci/efes/epcs/prot/ntr.action.

Taxpayers who want to file online and are able and willing to prepare their own tax returns can use the CRA’s NETFILE service (which was available for the filing of returns for 2025 as of Monday, February 23, 2026); information on that service can be found at https://www.canada.ca/en/services/taxes/income-tax/personal-income-tax/how-file/tax-software/send-return/netfile.html. While there are some kinds of returns which cannot be filed using NETFILE (for instance, a return for a non-resident of Canada, or for a deceased taxpayer), the vast majority of Canadians who wish to do so will be able to NETFILE their return.

A return can be filed using NETFILE only where it is prepared using tax return preparation software which has been certified by the CRA. While such software can be found for sale just about everywhere at this time of year, approved software which can be used free of charge, or for a nominal charge, is also available. A listing of third-party tax return software certified for use in preparing individual returns for 2025 is maintained (with links to the software product websites) on the CRA website at https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/netfile-overview/certified-software-netfile-program.html.

A smaller but still significant number of Canadians prefer to complete their tax return on paper: last year, just under two and a half million returns were prepared and filed in this way. The CRA has, for many years, been urging Canadian taxpayers to file their returns online and, at the same time, has reduced the options available to Canadians who wish to obtain a tax guide and return package in hard copy. For instance, the CRA previously mailed a tax guide and return package to taxpayers who had paper-filed in the previous year; this year, however, it has discontinued that practice.

Notwithstanding those difficulties it is still possible to obtain hard copy of the tax guide and return, in the following ways.

The first method is to go onto the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package.html, select the return for your province or territory of residence as of the end of 2025, and then download and print that document.

Those who do not wish to or cannot download or print a hard copy of the return package can order a tax return package online at https://apps.cra-arc.gc.ca/ebci/cjcf/fpos-scfp/pub/rdr. That package will then be sent to the taxpayer by regular mail.

Finally, it’s still possible to order hard copy of the return package by calling the CRA’s automated forms and publications line at 1-855-330-3305. That line is available from 6 a.m. to 3 a.m. Eastern Time, 7 days a week. This year, for the first time, taxpayers who request a form or publication through the automated telephone service are required to provide their social insurance number in order to receive that service.

Finally, taxpayers who are unable or unwilling to complete and file the 2025 tax return on their own but lack the financial wherewithal to pay someone else to do so have another option. Volunteers at a number of Community Volunteer Income Tax Clinics across the country will prepare and file simple returns on behalf of lower-income taxpayers, free of charge. Those Community Volunteer Income Tax Clinics are generally found in community centres or libraries, and a searchable database listing such Clinics across Canada can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/community-volunteer-income-tax-program.html.

In some ways, the annual March 1 deadline for making a contribution to a registered retirement savings plan (RRSP) couldn’t come at a worse time with respect to the tax and non-tax financial obligations of most Canadians. During February, credit card bills for holiday spending will be coming due, taxpayers who pay tax by instalments will be facing the March 16 deadline for the first such instalment payment of 2026, and, for all taxpayers, any balance of income tax owed for 2025 must be paid to the federal government on or before April 30, 2026.

In some ways, the annual March 1 deadline for making a contribution to a registered retirement savings plan (RRSP) couldn’t come at a worse time with respect to the tax and non-tax financial obligations of most Canadians. During February, credit card bills for holiday spending will be coming due, taxpayers who pay tax by instalments will be facing the March 16 deadline for the first such instalment payment of 2026, and, for all taxpayers, any balance of income tax owed for 2025 must be paid to the federal government on or before April 30, 2026.

Notwithstanding all of those competing financial priorities, the unvarying rule is that RRSP contributions, in order to be deducted on the income tax return for 2025, must be made on or before March 1, 2026. (Where, as is the case this year, the March 1 contribution deadline falls on a Sunday, CRA administrative policy extends the deadline by one day, to Monday, March 2, 2026.)

The basic rules governing RRSP contributions allow a Canadian taxpayer to make a current year contribution to their RRSP of the lesser of 18% of earned income for the previous taxation year or the annual RRSP limit, which is a specified dollar amount. (For 2025, the annual RRSP dollar amount limit is $32,490.) Where a taxpayer has not made the maximum allowable RRSP contribution in a previous tax year, that unused contribution room is carried forward and added to allowable RRSP contribution room for 2025. The total contribution amount made for the year can then be deducted from income on the annual return.

The wisdom of making annual contributions to one’s RRSP has become an almost unquestioned tenet of tax and retirement planning, but the one question that doesn’t often get asked by taxpayers is whether it makes sense to contribute to an RRSP, or if a different savings vehicle is more appropriate to their tax and financial situation – or whether it’s even possible to make an RRSP contribution.

For just over 50 years after RRSPs were introduced in 1957, they represented the only means by which taxpayers who were not members of a registered pension plan could save for retirement on a tax-assisted basis. That changed in 2009, when the tax-free savings account (TFSA) program was introduced.

The tax treatment of TFSA contributions is essentially the inverse of the tax rules governing RRSP contributions. RRSP contributions made can be deducted from income and all contributions and all investment income earned by those contributions can compound free of tax inside the RRSP. However, when funds are withdrawn from the RRSP (which can be done at any time but must start, at the latest, the year after the taxpayer turns 71) all such funds are fully taxed as income. Conversely, contributions made to a TFSA are not deductible from income in the year they are made. However, as is the case with an RRSP, contributed funds and investment income earned on those funds can compound free of tax inside the TFSA. However, any and all funds withdrawn from the TFSA are received free of tax, whether they represent original contributions or investment income earned on those contributions.

Given the specific rules governing RRSPs and TFSAs, taxpayers must consider whether it is possible for them to make an RRSP contribution and, if so, whether an RRSP or a TFSA is their best vehicle for short-term or long-term saving. Some of the considerations which will influence that decision are as follows.

Where no RRSP contribution can be made

For Canadians over the age of 71, there is no real choice. All individual Canadians must collapse their RRSPs by the end of the year in which they turn 71, and no RRSP contributions can be made after that time. Practically speaking, a TFSA is the only tax-sheltered savings vehicle to which taxpayers over age 71 can contribute. Most taxpayers over the age of 71 have transferred their RRSP savings to a registered retirement income fund (RRIF) and are required to withdraw a specified percentage of funds from that RRIF each year. Taxpayers who are in the fortunate position of having such income in excess of current cash flow needs can contribute some or all of such amounts to a TFSA, to the extent of their TFSA contribution room for the year. While the RRIF withdrawals must still be included in income and taxed in the year of withdrawal, transferring the funds to a TFSA will allow them to continue compounding free of tax and no additional tax will be payable when any funds in the TFSA are withdrawn. And, unlike RRIF or RRSP withdrawals, monies withdrawn in the future from a TFSA will not affect the planholder’s eligibility for Old Age Security benefits or other means-tested tax credits.

When RRSP contribution room is reduced

The minority of Canadian taxpayers who belong to an employer-sponsored registered pension plan (RPP) save some percentage of income for retirement through contributions made to that RPP, with the employer also making a contribution to the benefit of the employee. The value of benefits earned under the RPP each year by the employee is known as a pension adjustment, and generally any such pension adjustment reduces the employee’s ability to contribute to an RRSP in the following year. Where the ability to contribute to an RRSP is limited in this way, a TFSA is likely the best available alternative for tax-assisted savings.

When the savings goal is short-term

Where savings are being put aside for an expenditure that is likely to be made in the next five years (like a new car, a wedding, or a “bucket list” vacation), saving through a TFSA is almost certain to be the better option. Taxpayers in that situation are sometimes tempted to make an RRSP contribution instead, in order to get a tax refund, and then to withdraw the funds when the planned expenditure is to be made. However, while choosing that option will provide a deduction on this year’s return and probably generate a tax refund, tax will still have to be paid when the funds are withdrawn from the RRSP a year or two later. And, more significantly from a long-term point of view, using an RRSP in this way will eventually erode one’s ability to save for retirement, as RRSP contributions which are withdrawn from the plan cannot be replaced – the contribution room used to make that contribution is permanently lost. While the amounts involved may seem small, the loss of compounding on even a relatively small amount over 25 or 30 years can make a significant dent in one’s ability to save for retirement.

When income is likely to increase significantly in the near future

The greatest tax benefit of contributing to an RRSP is realized when contributions are made when income (and therefore tax payable) is higher, and the intention is to withdraw those funds when both income and the rate of tax payable on that income is lower. Taxpayers who are expecting their income to rise significantly within a few years – for example students in post-secondary or professional education or training

programs – can save some tax by contributing to a TFSA while they are in school and their income (and therefore their tax rate) is low, allowing the funds to compound on a tax-free basis, and then withdrawing the funds tax-free once they’re working, when their tax rate will be higher. At that time, the withdrawn funds can be used to make an RRSP contribution, which will be deducted against income which would be taxed at the much higher rate, generating a tax savings. And, if a need for funds should arise in the meantime, a tax-free TFSA withdrawal can always be made.

When income after retirement isn’t likely to change

Lower-income taxpayers, for whom there isn’t likely to be a great difference between pre- and post-retirement income, are likely better off saving through a TFSA. That’s especially the case where those taxpayers may be eligible in retirement for means-tested government benefits like the Guaranteed Income Supplement or tax credits like the GST/HST credit or age credit. Withdrawals made from an RRSP or RRIF during retirement (including the minimum required withdrawal from an RRIF) will be included in income for purposes of determining eligibility for such benefits or credits, and lower-income taxpayers could find that such withdrawals have pushed their income to a level which reduces or eliminates their eligibility. On the other hand, monies withdrawn from a TFSA are not included in income for the purpose of determining eligibility for any government benefits or tax credits, so saving through a TFSA will ensure that receipt of such benefits is not put at risk.

Many Canadian couples, by the time they reach retirement, have achieved most of life’s major financial goals, and the recurring costs of reaching those goals are no longer a consideration. Retirement savings are in place, most homeowners are mortgage-free, and the cost of raising (and providing a post-secondary education for) their children is something already accomplished.

Many Canadian couples, by the time they reach retirement, have achieved most of life’s major financial goals, and the recurring costs of reaching those goals are no longer a consideration. Retirement savings are in place, most homeowners are mortgage-free, and the cost of raising (and providing a post-secondary education for) their children is something already accomplished.

However, there is one major cost which can never be left behind, and that is income tax. For many retirees, the annual tax bill represents their single largest expenditure, and our tax system recognizes this financial reality by providing a number of tax deductions and credits for which only individuals aged 65 and older are eligible.

Most Canadians aged 65 and older do claim those age-related tax deductions and credits on their annual return. There is, however, one age-related tax break of which many Canadians are unaware: pension income splitting. This lack of awareness is particularly unfortunate in light of the fact that pension income splitting has greater potential to reduce the overall family tax bill than any other single tax deduction or tax credit available to older Canadians.

Pension income splitting also offers attributes that are seldom found in other tax deduction or credit measures. First, the eligibility rules with respect to pension income splitting do not include an income ceiling (individual or family) which would limit claims which can be made. Second, there is no limitation placed on the amount by which income tax payable for the year can be reduced by pension income splitting. Third, utilizing pension income splitting does not require any expenditure of funds on the part of the taxpayer(s). And finally, no pre-planning or actual reallocation of income is needed: to benefit from pension income splitting, all that’s needed is for each spouse to file a single form (the T1032) with the CRA and to make a single entry on their 2025 tax return.

Pension income splitting basically involves taking private pension income which was received during the year by one spouse and allocating some of that income to the other spouse for tax purposes. Like all forms of income splitting, pension income splitting works because Canada has what is called a “progressive” tax system, in which the applicable tax rate goes up as income rises. For 2025, the federal tax rate applied to the first $57,375 of taxable income is 14.5%, while the federal rate applied to the next $57,375 of such income is 20.5%. So, an individual who has $100,000 in taxable income would pay federal tax of about $17,057 (14.5% of $57,375 plus 20.5% of $42,625). If that $100,000 was divided equally between such individual and their spouse, each would have $50,000 in taxable income and federal tax payable of $7,250 (14.5% of $50,000). The total federal tax bill for the family would be $14,500, saving just over $2,500 in federal tax payable for the year.

The general rule with respect to pension income splitting is that a taxpayer who receives private pension income during the year is entitled to allocate up to half that income (without any dollar limit) to their spouse for tax purposes. For pension income splitting purposes, private pension income means payments from a pension plan and, where the income recipient is aged 65 or older at the end of the year, payments from an annuity, a registered retirement savings plan (RRSP), or a registered retirement income fund (RRIF). Government source pensions, like the Canada Pension Plan, Québec Pension Plan, or Old Age Security payments do not qualify for pension income splitting, regardless of the age of the recipient.

The mechanics of pension income splitting are relatively simple. There is no need to transfer funds between spouses or to make any change in the actual payment or receipt of qualifying pension amounts, and no need to notify a pension or retirement savings plan administrator. Taxpayers who wish to split eligible pension income received by either of them must complete Form T1032, Joint Election to Split Pension Income (T1032 E (23)). That form, which is not included in the annual tax return package, can be found on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t1032.html, or can be ordered (in English or French) by calling the CRA’s automated forms ordering telephone line at 1-855-330-3305.

Using the T1032, the taxpayer receiving the private pension income and the spouse with whom that income is to be split must make a joint election and provide the amount of pension income to be split. Where returns are filed electronically, the completed T1032 must be retained in case the Canada Revenue Agency makes a request for it; where the returns are paper filed, the completed T1032 form is filed with each spouse’s return. Since the splitting of pension income affects the income, and therefore the tax liability, of both spouses, the election must be made and the form filed by both spouses – an election filed by only one spouse or the other won’t suffice. In addition to filing the T1032, the spouse who actually received the private pension income to be split must deduct from income the amount of eligible pension income which is being allocated to their spouse. That deduction is taken on Line 21000 of their 2025 return. And, conversely, the spouse to whom the eligible pension income is being allocated is required to add that amount to their income on the return, this time on Line 11600.

Unfortunately, the T1 package issued by the Canada Revenue Agency simply outlines the mechanics of how to carry out pension income splitting but does not provide any information on the benefits of doing so. More detailed information on those benefits and on pension income splitting generally can, however, be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/pension-income-splitting.html.

Finally, taxpayers who would have been able to benefit from pension income splitting in previous taxation years but were unaware that they could do so may still be able to benefit. The CRA notes on its website that “Under certain circumstances, the CRA may allow you to make a late or amended election, or revoke an original election, if the application is made on or before the day that is three calendar years after the filing-due date for the year that the election applies. You and your spouse or common-law partner must agree to any amendment or revocation of the election.” Taxpayers who find themselves in that situation are advised to call the CRA’s Individual Income Tax Enquiries Line at 1-800-959 8281.

Every resident of Canada is required to pay income tax on their worldwide income. And while the vast majority of Canadians do so when and as required (with varying degrees of reluctance), very few understand how the amount of tax they must pay is calculated, or the system by which such tax payable is remitted to the federal taxation authorities.

Every resident of Canada is required to pay income tax on their worldwide income. And while the vast majority of Canadians do so when and as required (with varying degrees of reluctance), very few understand how the amount of tax they must pay is calculated, or the system by which such tax payable is remitted to the federal taxation authorities.

That’s particularly true for employed Canadians, who have tax deducted from their paycheques by their employer and remitted to the Canada Revenue Agency (CRA) on their behalf. When those taxpayers file a tax return for the year, all tax amounts remitted to the CRA on their behalf are credited against their total income tax bill for the year. The goal is for amounts withheld from the taxpayer’s paycheques throughout the year to be at least the amount of income tax actually owed for that year. In most cases, the system works, with the majority of taxpayers who file a return for the year receiving a tax refund.

While this “deduction at source” system generally works well, it is also a system which is largely invisible to the taxpayer, requiring virtually no action on their part. That’s not the case, however, for taxpayers who pay income tax by instalment payment, and some time during the month of February, millions of those taxpayers will receive an Instalment Reminder from the CRA, in which tax instalment amounts to be paid on March 16 and June 15, 2026 are set out.

The CRA’s decision to send an Instalment Reminder to particular taxpayers isn’t an arbitrary one, although it may seem so to the taxpayers who are unfamiliar with the instalment payment rules. Under those rules, the CRA issues an Instalment Reminder to a particular taxpayer where the amount of tax which is withheld from that taxpayer’s income throughout the year is not sufficient to cover the amount of income tax which they are actually required to pay for that year, leaving a balance owing when the return for the year is filed.

Put more technically, an Instalment Reminder is issued by the CRA when the amount of tax which was or will be owed by the taxpayer on filing is more than $3,000 in the current (2026) tax year and either of the two previous (2025 or 2024) tax years. Essentially, the instalment payment system for 2026 will be triggered where the amount of tax withheld from the taxpayer’s income throughout the year is at least $3,000 less than their total tax owing for 2026 and for either 2025 or 2024. For residents of Québec, that threshold amount which triggers the issuance of a federal Instalment Reminder is $1,800.

There’s a lot about the Instalment Reminder received by taxpayers that is confusing. There is no indication of how the CRA arrives at the numbers which are listed as instalment payments to be made in March and June 2026 and, in addition, the notice is called an Instalment “Reminder” and not an actual requirement to pay, or a bill from the CRA.

Taxpayers who receive an Instalment Reminder actually have three options when it comes to deciding how to respond. Each of those options has its own benefits and disadvantages, as outlined below.

No-Calculation Option

First, the taxpayer can simply pay the amounts set out in the Instalment Reminder, in full, and on or before the required dates. A taxpayer who does so will not face any interest or penalty charges, even if the amount remitted by way of instalment payments turns out to be less than the taxpayer’s actual tax payable for the year.

There are, however, circumstances in which paying the amounts specified on the Instalment Reminder might not be the best course of action. The amounts set out in the Reminder are based on the CRA’s best estimate of the taxpayer’s actual tax payable for the year, based on prior year income and taxes. Where tax payable for 2026 is likely to be significantly less (for instance, where the taxpayer recently retired and their income for 2026 will be less than income earned in the last year or two of employment) another approach can make more sense. A taxpayer who does not want to pay the amounts set out in the Instalment Reminder has two other options, as outlined on the CRA website.

Prior-Year Option

This option is best if the taxpayer’s 2026 income, deductions, and credits will be similar to such amounts for 2025, but significantly different from those in 2024. In that case, the taxpayer can determine 2026 tax instalment amounts based on the tax payable for 2025, as calculated on their return for that year.  As the first instalment for 2026 is not due until March 16, many taxpayers will already have completed and filed their return for 2025 and will know the exact amount of their tax payable for that year. (The forms for completing the return for 2025 are available now on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package.html, and many of the software packages used to complete a return for 2025 can now be downloaded or purchased.)  

Current-Year Option

This option is best if the taxpayer’s 2026 income, deductions, and credits will be significantly different from those in both 2025 and 2024 – as, for example, a taxpayer who retired at the end of 2025.

Using this option, the taxpayer determines the amount of instalment payments to be made based on their estimated current year (2026) tax payable. The CRA provides an online calculator (available at calculation chart for instalment payments for 2026 (PDF, 94 KB)) which can be used to assist in making that determination.

While the no-calculation option – simply paying the amounts set out in the Instalment Reminder by the due dates – is entirely risk-free, that’s not necessarily the case with the prior-year and current-year options. Should the taxpayer’s calculations with respect to the amount of income tax which will be owed for the 2026 tax year be inaccurate, meaning a shortfall in instalment payments, the CRA will impose interest charges. For the current quarter (January 1 to March 31, 2026) the interest rate charged by the CRA is 7%, and all such interest amounts levied are compounded daily. The CRA can also impose penalty charges for insufficient instalments, but such penalty charges are levied only where the amount of instalment interest charges for the year is more than $1,000.

Taxpayers who don’t want to risk having to pay interest charges, or who simply don’t want to involve themselves in calculating tax payable amounts for the year, can simply pay the amounts listed in the Instalment Reminder issued by the CRA. The more technical-minded (or those who want to ensure that they are paying no more than absolutely required and are willing to take the risk of having to pay interest on any shortfall) can avail themselves of the second or third options outlined above.

Detailed information on the instalment payment system for 2026, and the calculation and payment options available to taxpayers, can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/payments/payments-cra/individual-payments/income-tax-instalments.html.

The strong preference of many older Canadians is to remain in their own homes for as long as possible – usually described as “aging in place”. There’s a lot to recommend that choice – moving, at any age, is a stressful experience. As well, remaining in one’s current home often means staying close to family and friends, and in a familiar community. There’s also a financial aspect to staying in one’s home: while home ownership has its unavoidable costs in the form of property taxes and utilities costs and the inevitable maintenance and repair bills, the cost of living in a retirement home is usually several thousand dollars per month. And, in the event that a greater level of care is needed, the cost of a bed in a long-term care home is even greater.

The strong preference of many older Canadians is to remain in their own homes for as long as possible – usually described as “aging in place”. There’s a lot to recommend that choice – moving, at any age, is a stressful experience. As well, remaining in one’s current home often means staying close to family and friends, and in a familiar community. There’s also a financial aspect to staying in one’s home: while home ownership has its unavoidable costs in the form of property taxes and utilities costs and the inevitable maintenance and repair bills, the cost of living in a retirement home is usually several thousand dollars per month. And, in the event that a greater level of care is needed, the cost of a bed in a long-term care home is even greater.

That said, the home that suited a growing family or even empty nesters in their early retirement years may no longer meet the needs of older retirees. When that’s the case, selling the home and moving is not the only available choice. Often, changes can be made to a home to make it both safe and comfortable for its older owners, and the out-of-pocket cost of making such changes can be offset by the availability of a non-refundable federal tax credit – the Home Accessibility Tax Credit (HATC) program.

The HATC is an unusually broad and flexible tax credit in a number of ways, including the broad definition of the kinds of expenses which qualify for the credit, who can claim the credit, and the number of tax credit programs for which expenses incurred may be eligible.

In a nutshell, the HATC program provides a tax credit for changes made to a home which allow a “qualifying individual to gain access to, or be mobile or functional within, the dwelling or which reduce the risk of harm to a qualifying individual within the dwelling or in gaining access to the dwelling”. It’s apparent from that description that a very broad range of expenses can qualify for the purpose of the HATC – everything from the purchase and installation of a bathtub grab bar to a full-scale renovation done to provide a ground floor bathroom. The limitations on which expenses qualify for the credit are actually quite few in number. Generally, in order to be eligible for the credit, a cost incurred must be for a change which is permanent part of the property, and costs which represent the ordinary costs of maintaining a home and property and/or are periodic or recurring in nature, do not qualify. The listing of non-qualifying expenses provided by the Canada Revenue Agency (CRA) is as follows:

• amounts paid to acquire a property that can be used independently of the qualifying renovation;
• the cost of annual, recurring, or routine repairs or maintenance;
• amounts paid to buy household appliances;
• amounts paid to buy electronic home-entertainment devices;
• the cost of housekeeping, security monitoring, gardening, outdoor maintenance, or similar services;
• financing costs for the qualifying renovation; and
• the cost of renovations incurred mainly to increase or maintain the value of the dwelling.

The definition of a “qualifying individual” for purposes of the HATC includes both homeowners who are over the age of 64 at the end of the taxation year for which the claim is being made, as well as individuals of any age who are eligible for the federal disability tax credit at any time during the year. However, the list of individuals who can make a claim for the HATC is broader than that.

Claims for the HATC can also be made by an “eligible individual” and for purposes of the credit an eligible individual includes the spouse or common-law partner of a qualifying individual. Other relatives of a qualifying individual, including a parent, grandparent, child, grandchild, brother, sister, aunt, uncle, nephew, or niece of that qualifying individual (or the spouse of any of these individuals) can also make the claim for the HATC, as long as the elderly or disabled individual is dependent on the relative making the claim. The rules governing the circumstances in which a relative other than a spouse or common-law partner can make a claim for the HATC are somewhat complex, and those rules are set out in detail on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-31285-home-accessibility-expenses.html.

It's a basic tenet of the Canadian tax system that an expenditure can only be claimed once, for either tax deduction or tax credit purposes – that “double dipping” by claiming the same expense twice is not allowed. The HATC is one of the rare exceptions to that rule, in that an eligible expense for purposes of the HATC which also qualifies as a medical expense can be claimed twice – as a medical expense tax credit and as a home accessibility tax credit.

Finally, there are a number of other grant, forgivable loan, or tax credit programs at the federal, provincial, and territorial government levels which provide assistance to eligible Canadians with the cost of making a home safer or more accessible for older residents. No matter the source or amount of such financial assistance, any amount received does not reduce the amount claimable for purposes of the HATC.

Take, for example a couple, each of whom is over the age of 64, and each of whom has an income of $30,000. The couple live in their own two-story home, in which the bedrooms and bathrooms are on the second floor. As the result of both age and illness- related mobility restrictions, one of the spouses must now use a wheelchair to move about within their home. In order to be able to stay in that home, the couple decide to undertake renovations which will create a bedroom and bathroom on the first floor of the home. They also replace the stairs leading to the front door of their home with a ramp. The cost to do these renovations is $15,000. In their tax return for the year, the couple can make the following claims with respect to the cost of the renovations.

Claim for HATC

The total cost of the renovations was $15,000. The HATC is calculated as 14.5% of eligible costs incurred, meaning that the credit for the renovation is $2,175 ($15,000 times 14.5%). The claim for the HATC is then made on line 31285 of the return, and federal income tax payable is reduced by $2,175.

Claim for medical expense tax credit (METC)

Under general rules, Canadian taxpayers can claim a federal medical expense tax credit for eligible medical expenses which exceed 3% of their net income for the year, or       $2,834, whichever is less.

Since both spouses have the same income, the tax result will be the same, regardless of who makes the claim for the METC. (If their incomes were different, the claim for the METC should usually be made by the lower-income spouse.)

Since the income of the spouse making the claim is $30,000, 3% of net income is $900, meaning that $14,100 ($15,000 minus $900) of the cost of renovations can be claimed for purposes of the METC. The METC is equal to 14.5% of qualifying medical expenses, meaning that the credit with respect to the renovation costs will be $2,044.50 ($14,100 times 14.5%), and federal tax payable by the individual making the claim will be reduced by that amount.

In total, the couple has received $4,219.50 in federal non-refundable tax credits (and thereby reduced their federal tax payable for the year by that amount) with respect to their renovation costs, bringing the net cost of those renovations from $15,000 to $10,780.50.

There is an overall limit of $20,000 on the amount of eligible expenses which can be incurred in respect of a single dwelling during a single tax year, regardless of the number of qualifying individuals who live in that dwelling. However, there are no restrictions on the number of times a claim for the HATC can be made. Consequently, taxpayers who are contemplating incurring costs which exceed the $20,000 annual limit should consider spreading those costs over more than one taxation year, in order to maximize the total HATC claim which can be made.

Detailed information on the HATC can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-31285-home-accessibility-expenses.html.

Individual income tax rates and brackets for 2026.

Alberta

Individual income tax rates and brackets for 2026

During the 2026 taxation year the province of Alberta will levy individual income tax using the following income brackets and tax rates.

Tax Rate          Taxable Income Brackets

8.0%                     up to $61,200

10.0%                   $61,201 to $154,259

12.0%                   $154,260 to $185,111

13.0%                   $185,112 to $246,813

14.0%                   $246,814 to $370,220

15.0%                   over $370,220

Alberta does not impose an individual income tax surtax or a high-income surtax.

British Columbia

Individual income tax rates and brackets for 2026

During the 2026 taxation year the province of British Columbia will levy individual income tax using the following income brackets and tax rates.

Tax Rate          Taxable Income Brackets

5.06%                   up to $50,363

7.70%                   $50,364 to $100,728

10.50%                 $100,729 to $115,648

12.29%                 $115,649 to $140,430

14.70%                 $140,431 to $190,405

16.80%                 $190,406 to $265,545

20.5%                   Over $265,545

British Columbia does not impose an individual income tax surtax or a high-income surtax.

Manitoba

Individual income tax rates and brackets for 2026

During the 2026 taxation year, the province of Manitoba will levy individual income tax using the following income tax brackets and tax rates.

Tax Rate          Taxable Income Brackets

10.8%                   up to $47,000

12.75%                 $47,001 to $100,000

17.40%                 over $100,000

The province of Manitoba does not impose an individual income tax surtax or a high-income surtax.

New Brunswick

Individual income tax rates and brackets for 2026

During the 2026 taxation year, the province of New Brunswick will levy individual income tax using the following income tax brackets and tax rates.

Tax Rate          Taxable Income Brackets

9.4%                     up to $52,333

14.0%                   $52,334 to $104,666

16.0%                   $104,667 to $193,861

19.5%                   over $193,861

The province of New Brunswick does not impose an individual income tax surtax or a high-income surtax.

Newfoundland and Labrador

Individual income tax rates and brackets for 2026

During the 2026 taxation year, the province of Newfoundland and Labrador will levy individual income tax using the following income tax brackets and tax rates.

Tax Rate          Taxable Income Brackets

8.70%                    up to $44,678

14.50%                  $44,679 to $89,354

15.80%                  $89,355 to $159,528

17.80%                  $159,529 to $223,340

19.80%                  $223,341 to $285,319

20.80%                  $285,320 to $570,638

21.30%                  $570,639 to $1,141,275

21.80%                  over $1,141,275

The province of Newfoundland and Labrador does not impose an individual income tax surtax or a high-income surtax.

Northwest Territories

Individual income tax rates and brackets for 2026

During the 2026 taxation year, the Northwest Territories will levy individual income tax using the following income tax brackets and tax rates.

Tax Rate          Taxable Income Brackets

5.9%                     up to $53,003

8.6%                     $53,004 to $106,009

12.2%                   $106,010 to $172,346

14.05%                 over $172,346

The Northwest Territories does not impose an individual income tax surtax or a high-income surtax.

Nunavut

Individual income tax rates and brackets for 2026

During the 2026 taxation year, Nunavut will levy individual income tax using the following income tax brackets and tax rates.

Tax Rate          Taxable Income Brackets

4.0%                     up to $55,801

7.0%                     $55,802 to $111,602

9.0%                     $111,603 to $181,439

11.50%                 over $181,439

Nunavut does not impose an individual income tax surtax or a high-income surtax

Nova Scotia

Individual income tax rates and brackets for 2026

During the 2026 taxation year, the province of Nova Scotia will levy individual income tax using the following income tax brackets and tax rates.

Tax Rate          Taxable Income Brackets

8.79%                   up to $30,995

14.95%                 $30,996 to $61,991

16.67%                 $61,992 to $97,417

17.50%                 $97,418 to $157,124

21.00%                 over $157,124

The province of Nova Scotia does not impose an individual income tax surtax or a high- income surtax.

Ontario

Individual income tax rates and income brackets for 2026

During the 2026 tax year, the province of Ontario will levy individual income tax using the following income brackets and tax rates.

Tax Rate          Taxable Income Brackets

5.05%                    up to $53,891

9.15%                    $53,892 to $107,785

11.16%                  $107,786 to $150,000

12.16%                  $150,001 to $220,000

13.16%                  over $220,000

For 2026, the province of Ontario levies an individual surtax of 20% of provincial tax payable over $5,818 plus 36% of provincial income tax over $7,446.

Information on Ontario individual income tax brackets, rates, and surtax rates for 2026 can be found on the provincial government website at https://data.ontario.ca/dataset/personal-income-tax-rates-and-credits/resource/77bc9ec1-068a-4bb1-9a5c-05a508eb92a0.

Prince Edward Island

Individual income tax rates and income brackets for 2026

During the 2026 tax year, the province of Prince Edward Island will levy individual income tax using the following income brackets and tax rates.

Tax Rate          Taxable Income Brackets

9.5%                     up to $33,928

13.47%                 $33,929 to $65,820

16.60%                 $65,821 to $106,890

17.62%                 $106,891 to $142,250

19.00%                 over $142,250

The province of Prince Edward Island does not impose an individual income tax surtax or a high-income surtax.

Québec

Individual income tax rates and brackets for 2026

During the 2026 taxation year the province of Québec will levy provincial individual income tax using the following income brackets and tax rates.

Tax Rate          Taxable Income Brackets

14.0%                   up to $54,345

19.0%                   $54,346 to $108,680

24.0%                   $108,681 to $132,245

25.75%                 over $132,245

The province of Québec does not impose an individual income tax surtax or a high-income surtax.

Details of the province’s personal income tax brackets and rates for 2026 can be found on the Revenu Québec website at https://www.revenuquebec.ca/en/businesses/source-deductions-and-employer-contributions/employers-kit/principal-changes-for-2026-employers-kit/#accordion_169636=[1].

Saskatchewan

Individual income tax rates and brackets for 2026

During the 2026 taxation year the province of Saskatchewan will levy individual income tax using the following income brackets and tax rates.

Tax Rate          Taxable Income Brackets

10.5%                   up to $54,532

12.5%                   $54,533 to $155,805

14.5%                   over $155,805

The province of Saskatchewan does not levy an individual income tax surtax or a high-income surtax.

Yukon Territory

Individual income tax rates and brackets for 2026

During the 2026 taxation year, the Yukon Territory will levy individual income tax using the following income tax brackets and tax rates.

Tax Rate          Taxable Income Brackets

6.4%                     up to $58,523

9.0%                     $58,524 to $117,045

10.9%                   $117,046 to $181,440

12.8%                   $181,441 to $500,000

15.0%                   over $500,000

The Yukon Territory does not impose an individual income tax surtax or a high-income surtax.

The Employment Insurance premium rate for 2026 is set at 1.63%.

The Employment Insurance premium rate for 2026 is set at 1.63%.

Yearly maximum insurable earnings are increased to $68,900, making the maximum employee premium $1,123.07.

As in previous years, employer premiums are 1.4 times the employee premium. The maximum employer premium for 2026 is therefore $1,572.30.

As of 2024, there are two contribution levels for the Québec Pension Plan (QPP). Income amounts and employee contribution percentages for 2026 for each contribution level are as follows:

As of 2024, there are two contribution levels for the Québec Pension Plan (QPP). Income amounts and employee contribution percentages for 2026 for each contribution level are as follows:

• First-tier contributions for 2026 are set at 6.3% of pensionable earnings between $3,500 and $74,600. 
• Second-tier contributions for 2026 are set at 4.0% of pensionable earnings between $74,600 and $85,000.

The maximum employee QPP contribution in 2026 for employees making only first-tier contributions (those with pensionable earnings of $74,600 or less) will be $4,479.30. Employees making second-tier contributions will be required to contribute up to an additional $416.00 in contributions for the year.

As of 2024, there are two contribution levels for the Canada Pension Plan. Income amounts and employee contribution percentages for 2026 for each contribution level are as follows.

As of 2024, there are two contribution levels for the Canada Pension Plan. Income amounts and employee contribution percentages for 2026 for each contribution level are as follows.

• First-tier contributions for 2026 are set at 5.95% of pensionable earnings between $3,500 and $74,600. 
• Second-tier contributions for 2026 are set at 4.0% of pensionable earnings between $74,600 and $85,000.

The maximum employee CPP contribution in 2026 for employees making only first-tier contributions (those with pensionable earnings of $74,600 or less) will be $4,230.45. Employees making second-tier contributions will be required to contribute up to an additional $416.00 in contributions for the year.

Tax credit amounts on which individual, non-refundable federal tax credits for 2026 are based, and the actual tax credit claimable, will be as follows:

Tax credit amounts on which individual, non-refundable federal tax credits for 2026 are based, and the actual tax credit claimable, will be as follows:

                                                                   Credit amount          Tax credit

Basic personal amount*                                 $16,452                   $2,303

Spouse or common-law 
partner amount*                                             $16,452                   $2,303

Eligible dependant amount*                           $16,452                   $2,303

Age amount                                                    $9,208                     $1,289

  net income threshold for erosion of 
  age credit                                                      $46,432

Canada employment amount                          $1,501                    $210                       

Disability amount                                             $10,341                  $1,448

Adoption expenses credit                                $19,972                  $2,796

Medical expense tax credit (3% of 
net income ceiling)                                           $2,890

*For taxpayers having net income for the year of more than $258,482, amounts claimable for the basic personal amount, the spousal amount, and the eligible dependant amount for 2026 may differ.

The indexing factor for federal tax credits and brackets for 2026 is 2.0%. The following federal tax rates and brackets will be in effect for individuals for the 2026 tax year.

The indexing factor for federal tax credits and brackets for 2026 is 2.0%. The following federal tax rates and brackets will be in effect for individuals for the 2026 tax year.

Income level                       Federal tax rate

$16,452 - $58,523                       14.0%

$58,524 - $117,045                      20.5%

$117,046 - $181,440                    26.0%

$181,441 - $258,482                    29.0%

Over $258,482                             33.0%

Each new tax year brings with it a schedule of tax payment and filing deadlines, as well as some changes with respect to tax saving and planning opportunities. Some of the more significant dates and changes for individual taxpayers for 2026 are listed below.

Each new tax year brings with it a schedule of tax payment and filing deadlines, as well as some changes with respect to tax saving and planning opportunities. Some of the more significant dates and changes for individual taxpayers for 2026 are listed below.

Registered retirement savings plan (RRSP) deduction limit and contribution deadline

For 2025, the maximum current year contribution limit is $32,490. In order to make the maximum current year contribution for 2025 (for which the contribution deadline will be Monday March 2, 2026), it will be necessary to have earned income of $180,500 for the 2024 taxation year.

For 2026, the maximum current year contribution limit will increase to $33,810. In order to make the maximum current year contribution for 2026 (for which the contribution deadline will be Monday March 1, 2027) it is necessary to have earned income of $187,834 for the 2025 taxation year.

Tax-free savings account (TFSA) contribution limit

The TFSA current year contribution limit for 2026 remains at $7,000. The actual amount which can be contributed by a particular individual in 2026 includes both the current year contribution limit and any carryover of uncontributed or re-contribution amounts from previous taxation years.

Taxpayers can find out their individual 2026 TFSA contribution limit by calling the Canada Revenue Agency’s automated Individual Income Tax Enquiries Service at 1-800-959-8281 and selecting option 3. In order to receive information on one’s TFSA limit for the year, it’s necessary to provide one’s social insurance number and a personal identification number (PIN). Taxpayers who do not have a PIN must provide their date of birth and information on income amounts reported on prior year returns. Taxpayers who have registered for the CRA’s online tax service My Account can obtain information on their TFSA limit for 2026 on that service.

A current year TFSA contribution can be made at any time during the taxation year.

First Home Savings Account (FHSA) contribution limit for 2026

The FHSA current year contribution limit for 2026 is $8,000. The actual amount which can be contributed by a particular individual includes both the current year contribution limit and any carryover of uncontributed amounts from previous years, to a maximum carryover limit of $8,000.

There is a lifetime per individual limit of $40,000 in contributions to an FHSA, and an FHSA contribution can be made at any time during the taxation year.

Individual tax instalment deadlines for 2026

Millions of individual taxpayers pay income tax by quarterly instalments, which are due on the 15^th day of March, June, September, and December 2026. Where the 15^th of the month falls on a weekend or a statutory holiday, the instalment payment deadline is extended to the next business day.

The actual tax instalment due dates for 2026 are as follows:

• Monday March 16, 2026
• Monday June 15, 2026
• Tuesday September 15, 2026
• Tuesday December 15, 2026

Old Age Security income clawback threshold

For 2026, the income level above which Old Age Security (OAS) benefits are clawed back is $95,323.

Individual tax payment and filing deadlines in 2026

For all individual taxpayers, including those who are self-employed, the deadline for payment of any balance of 2025 taxes owed is Thursday April 30, 2026.

Taxpayers (other than self-employed individuals and their spouses) must file an income tax return for 2025 on or before Thursday April 30, 2026.

Self-employed taxpayers and their spouses must file an income tax return for 2025 on or before Monday June 15, 2026.

Both interest rates and the overall rate of inflation have come down from the highs recorded during 2022, but most Canadians and their families are still living with a significant degree of financial stress. While the overall rate of inflation may be down, the cost of food – the most non-discretionary of expenditures – continues to outpace that general rate of inflation. According to Statistics Canada, the cost of groceries has risen by 27.1% over the past five years.

Both interest rates and the overall rate of inflation have come down from the highs recorded during 2022, but most Canadians and their families are still living with a significant degree of financial stress. While the overall rate of inflation may be down, the cost of food – the most non-discretionary of expenditures – continues to outpace that general rate of inflation. According to Statistics Canada, the cost of groceries has risen by 27.1% over the past five years.

When the budgets of Canadian families are pushed beyond the point that day-to-day costs can be covered by income, families often turn to credit as a way of making ends meet. According to statistics compiled by Equifax Canada, the average per-consumer non-mortgage debt (meaning credit cards, lines of credit, and car loans) rose to $22,321 during the third quarter (July to September) of 2025. The difficulty, of course, is that paying off such debt – or even being able to make required payments on that debt – is almost impossible when the need to use credit arose because available income was already insufficient to cover increases in the cost of living.

The difficulty Canadians are having in managing their debt loads is borne out by statistics compiled by Equifax Canada with respect to debt repayment delinquency rates (defined as missed payment(s) which are more than 90 days past due). Those statistics show that such delinquency rates on non-mortgage debt during the third quarter of 2025 were up by 14% when compared to such rates for the third quarter of 2024. And, while some of the highest year-over-year increases in delinquency rates on non-mortgage debt were reported for consumers under the age of 36 (up by 18.55%), Canadians over the age of 35 aren’t, however, immune to missing payments on their credit card, line of credit, or car loan obligations. For those groups (aged 36 to over 65), the average delinquency rate for the third quarter of 2025 was up by 11.1% when compared to the same quarter in 2024. Not surprisingly, across all age groups, the greatest increase in delinquency rates occurred in urban centres where the cost of living is highest, including Toronto and Vancouver. And, finally, as noted by Equifax, “[T]he holiday season is a time when credit card spending typically rises $300-$500 per consumer and previous Equifax data shows that missed card payments increase by roughly 7 per cent come January.”

When individuals or families need to turn to credit to meet day-to-day financial obligations and then have difficulty repaying or even servicing that debt, the worst-case scenario is insolvency. And it is the case that an increasing number of Canadians are reaching the point at which they see their available options narrow to the point that they must consider making a consumer proposal or even declaring bankruptcy. Statistics released by the Office of the Superintendent of Bankruptcy for individuals for the month of September 2025 (available at https://ised-isde.canada.ca/site/office-superintendent-bankruptcy/en/statistics-and-research/insolvency-statistics-canada-september-2025) shows that consumer insolvencies increased by 10.6% during that month, as compared to figures from September 2024.

Neither individuals who are struggling with debt nor their creditors want to see things reach a point at which the debtor is insolvent. Individuals or families who are unable to manage their current debt obligations should be aware that there are viable options open to them – and equally, that there are courses of action which should be avoided.

Where an individual or a family feels overwhelmed by debt, it’s inevitable that they will be vulnerable to approaches which promise to make the problem go away – and which may even include offers to provide funds which can be used to repay existing debt. The website of the Financial Consumer Agency of Canada (an agency of the federal government) at https://www.canada.ca/en/financial-consumer-agency/services/debt.html and https://www.canada.ca/en/financial-consumer-agency/services/debt/debt-settlement-company.html contains a warning about using the services of such “debt settlement companies”, making the following points:

• Companies or agencies can’t guarantee they will solve your debt problems.
• Companies or agencies can’t quickly and easily fix your credit score.
• Companies should not (as they sometimes do) encourage you to take out a high-interest loan to pay off your debts.
• Companies and agencies may misrepresent services they offer as being part of a government program.

These warnings are based on the fact that debt settlement companies are for-profit businesses, not service providers. They collect fees from consumers who are in financial difficulty, sometimes making unrealistic commitments with respect to what they can accomplish. For instance, while such companies may promise to negotiate with creditors in order to reduce any amount owed, or the interest rate payable on existing debt, the fact is that creditors are not obliged to speak to or negotiate with a debt settlement company with respect to another person’s debts. Debt settlement companies may promise to “fix” a poor credit rating or credit report, but they have no actual power to do so. And the fees owed to such companies will almost certainly have to be paid, whether or not they can actually produce the results they promise.

That reality does not, however, mean that there is no help for individuals and families seeking to find their way out of debt, or that it’s necessary to pay large fees or to take on additional debt to do so. In fact, in almost every community of any size, there will be a credit counselling agency which can assist consumers with debt management and debt repayment and, equally important, will help the individual or family to establish financial management practices (like setting up a family budget) to ensure their future financial stability.

Such credit counselling agencies operate on a not-for-profit basis and provide their services at little or no cost to individuals or families who seek their assistance. Where credit counselling is needed, a credit counsellor will work with an individual or family to help identify the options which are available to them and the pros and cons of each option.

Most credit counselling agencies are members of Credit Counselling Canada (to be a member of Credit Counselling Canada, an agency must be accredited and must operate only on a not-for-profit basis), and a listing of their member agencies and locations can be found on the Credit Counselling Canada website at https://creditcounsellingcanada.ca/locate-a-counsellor/?cc=ON.

Detailed information on the kinds of services which are provided by such agencies is available on the same website at https://creditcounsellingcanada.ca/.

The approaching end of one calendar year and the start of another often causes individuals to reflect on their current life circumstances and on whether the new year might be the time to consider making a change – even a major change – in those circumstances.

The approaching end of one calendar year and the start of another often causes individuals to reflect on their current life circumstances and on whether the new year might be the time to consider making a change – even a major change – in those circumstances.

One the biggest life changes anyone can make is the decision to leave the work force and enter retirement. And, while almost everyone looks forward to retirement and an end to the day-to-day demands of working life, there’s also no question but that the decision to give up a regular paycheque is a stressful one. Particularly in a time when the cost of life’s necessities seems to be continually increasing, individuals wanting to retire have to wonder whether they can actually afford to do so, or whether it would be foolhardy, in light of the current economic realities, to give up a reliable, regular paycheque.

The first financial task faced by anyone contemplating retirement in the very near future is to determine what financial resources they will have to live on, and whether those resources are sufficient. And, while no one can accurately predict where inflation or interest rates are going, it is nonetheless possible to formulate “best case” and “worst case” scenarios, and to test one’s retirement income expectations against both.

For most Canadians, income in retirement will come from three sources. The first two sources – a Canada Pension Plan (CPP) retirement benefit and Old Age Security (OAS) payments – will be received by nearly all retirees. The fortunate minority who are members of an employer-sponsored registered pension plan will also receive a monthly benefit from that plan. For the majority of Canadian retirees who will not receive a pension from their employer, the balance of their income in retirement (after CPP and OAS) will come from private retirement savings accumulated in registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs), and tax-free savings accounts (TFSAs). The real question for most Canadians is how to determine the amount of annual after-tax income which all those sources of income will generate during their retirement years, and that’s not a simple calculation.

Money can be withdrawn from an RRSP, RRIF, or TFSA at any age, a CPP retirement pension can start anytime from age 60 to age 70, and Old Age Security benefits can be received as early as age 65 or as late as age 70. For both CPP and OAS, benefits will rise with each month that receipt of such benefits is deferred. As well, income from the different types of retirement income may be subject to different tax treatment, meaning that the after-tax amount received on $100 of income may vary widely, depending on the nature and source of that income.

The number of factors to consider and, especially, the complexity which results from the interaction of those factors could reasonably lead the average Canadian to conclude that it’s just not possible to make an accurate determination of the best way to structure their income in retirement, in order to ensure a reasonable income throughout their retirement years. But help is at hand – and at no cost!

That help is in the form of two online retirement planners which are available on the Government of Canada website. The first of those is a webpage entitled Learn and Plan for your Retirement, which can be found at https://www.canada.ca/en/services/retirement.html. While this webpage does include financial calculations, it goes beyond finances to provide more broad-based information on transitioning to and living in retirement.

For purely financial calculations, the federal government provides a Retirement Income Calculator. That Calculator is included in the Learn and Plan for your Retirement webpage, but can also be found in a stand-alone version at https://www.canada.ca/en/services/benefits/publicpensions/cpp/retirement-income-calculator.html.

Using the Retirement Income Calculator, individual Canadian taxpayers can enter their personal data, including their date of birth, gender and planned age of retirement, without the need to provide any personal identifying information. The user is then asked to provide information on income amounts which will be received from various sources, including any employer pension and Canada Pension Plan amounts and the age at which the user plans to begin receiving such income. Information is requested on the user’s period of residency in Canada, in order to determine whether they will be eligible to receive Old Age Security benefits and the amount of OAS benefits which will be provided at different ages. The calculator also allows the user to input the total amount of retirement savings accumulated to date. Finally, information is requested on any other sources of income which will be available during retirement.

Using that data, the calculator estimates the amount of income which will be available to the individual from each source during each year of their retirement and generates a bar graph and a table showing those income amounts.

The real benefit of the calculator, however, lies in the individual’s ability to vary the inputs – to create “what-if” scenarios in order to determine the effect any changes made will have on retirement income at various ages. Users can change the age at which they choose to receive government-sponsored retirement benefits like CPP and OAS, or can specify a different rate of return (pre- or post-retirement) earned on retirement savings. They can also change the period of time (i.e., life expectancy) over which retirement income will be spread. That way, the user can obtain answers to frequently asked questions like the following:

How much more will I receive if I accelerate – or delay – receipt of Canada Pension Plan or Old Age Security benefits, or both, for one, two, or more years?

What if I work an additional year or two after age 65 before starting RRSP withdrawals?

What if I earn income from part-time employment during retirement?

What if I choose to begin receiving CPP and OAS as soon as I am eligible, but defer making RRSP withdrawals?

What if I live longer than the average life expectancy?

For each of these what-if fact scenarios, the calculator will determine the effect that particular change will have on the amount of income receivable from each different retirement income source, and will provide a summary of income for each year of retirement from all such sources under each fact scenario created by the user.

There are, of course, some factors which can’t be incorporated into any calculator because they cannot be predicted or planned for. No one can predict how long their retirement will last (although the Retirement Income Calculator does project retirement income based on average life expectancy for individuals of the age and gender of the user). Similarly, it’s never possible to know what investment returns will be earned on retirement savings during retirement, or what the rate of inflation will be. The calculator’s ability to estimate future income data based on a number of different fact patterns does, however, allow users to create retirement income projections under both “best-case” and “worst-case” retirement income scenarios. And, based on those income projections, an individual can determine whether retirement during the upcoming 2026 calendar year is financially feasible.

As the holiday season approaches, and plans are made for seasonal celebrations and gift-giving, the idea that such activities could have tax consequences isn’t one that occurs to most Canadians. And, in most situations, there is no need to consider that unwelcome possibility, as our tax system has no application where gifts are given and parties held between and among friends and family members. However, where the gift giver or person or company sponsoring the holiday celebration is the employer of the recipient employee, there can be unintended (and unwanted) income tax consequences for that employee.

As the holiday season approaches, and plans are made for seasonal celebrations and gift-giving, the idea that such activities could have tax consequences isn’t one that occurs to most Canadians. And, in most situations, there is no need to consider that unwelcome possibility, as our tax system has no application where gifts are given and parties held between and among friends and family members. However, where the gift giver or person or company sponsoring the holiday celebration is the employer of the recipient employee, there can be unintended (and unwanted) income tax consequences for that employee.

It’s traditional for employers to provide employees with a little something “extra” at this time of year. Sometimes it’s a salary or wage bonus, or a gift, or a holiday celebration sponsored and hosted by the employer – and sometimes it’s all three. What employers certainly don’t want to do is to create a tax headache for their employees. Unfortunately, it’s also the case that a failure to properly structure such gifts or other extras like holiday parties can result in a tax cost to those employees when it comes time to file the tax return for the year next spring.

Trying to formulate and administer the tax rules around holiday gifts and celebrations is something of a no-win situation for the CRA. On an individual, or even a company level, the amounts involved are usually small, or even nominal, and the range of situations which must be addressed by the related tax rules are virtually limitless. As a result, the cost of drafting and administering those rules can outweigh the revenue generated by the enforcement of such rules, to say nothing of the potential ill-will generated by imposing tax consequences on holiday gifts or parties. Nonetheless, the potential exists for employers to provide what would otherwise be taxable remuneration in the guise of holiday gifts, and it’s the responsibility of the tax authorities to ensure that such situations don’t slip through the tax net.

The starting point for the Canada Revenue Agency’s rules is that any gift (cash or non-cash) received by an employee from their employer at any time of the year is considered to constitute a taxable benefit, to be included in the employee’s income for that year.

The CRA does, however, carve out some administrative concessions in this area, allowing non-cash gifts (as defined by the Agency, and within a specified annual dollar limit) to be received tax-free by employees, where such gifts are given on significant dates or events, like religious holidays such as Christmas or Hanukkah, or on the occasion of a birthday, a marriage, or the birth of a child.

In sum, the CRA’s administrative policy is that non-cash gifts to an arm’s length employee (meaning, generally, someone who is not related to the employer), regardless of the number of such gifts, will not be taxable if the total fair market value of all such gifts (including goods and services tax or harmonized sales tax) to that employee is $500 or less annually. The total value over $500 annually will be a taxable benefit to the employee and must be included on the employee’s T4 for the year, and on which income tax must be paid.

It’s important to remember the “non-cash” criterion imposed by the CRA, as the $500 per year administrative concession does not apply to what the CRA terms “cash or near-cash” gifts, and all such gifts are considered to be a taxable benefit and included in income for tax purposes, regardless of amount. For this purpose, the CRA considers both currency and cheques to be cash. As well, in situations in which an employee selects and purchases something, submits a receipt to the employer, and receives reimbursement for that purchase, that employee is considered to have received a cash gift, in the amount of the purchase/reimbursement.

Other instances of gifts made to employees are not so clear cut, as even a gift or award which cannot be converted to cash can be considered by the CRA to be a near-cash gift. Drawing a firm line between cash/near-cash gifts and non-cash gifts can be difficult, and the CRA provides the following information to help illustrate that difference.