2025 Tax Season Opens: Six Strategic Moves to Cut Your Bill
From maximizing RRSP contributions and income splitting to claiming medical and moving expenses, there are still ways to lower your 2025 tax bill and potentially increase your refund by hundreds if not thousands.
Monday marks the official start of the 2025 tax-filing season, when NETFILE, the CRA’s secure electronic filing service, reopens.
Maximize RRSP contributions
If you contribute to your RRSP by March 2, you can deduct the amount from your taxable income. This approach is ideal for Canadians who are in a higher tax bracket and expect to be in a lower tax bracket in retirement, when funds that are withdrawn are taxed.
For 2025, the RRSP deduction limit is 18 per cent of your 2024 earned income up to a maximum of $32,490. Don’t overcontribute, or you may have to pay a penalty of one per cent per month on contributions that exceed your RRSP deduction limit by more than $2,000.
If you choose to contribute to an RRSP while you’re in a lower tax bracket, remember that you can defer the tax deduction forward to a future year when your income is higher to maximize tax savings.
Consider income splitting
For couples with a significant difference in income, transferring money from the higher-income spouse to the lower-income spouse can reduce the amount of tax they’ll owe, says Jamie Golombek, managing director of tax and estate planning with CIBC. “It’s a great strategy,” he adds.
One way to do this is through a spousal RRSP, where the higher-income spouse makes a contribution to an RRSP owned by the lower-income spouse. The higher-income spouse gets an immediate tax deduction, while the lower-income partner will be taxed at a lower marginal tax rate when the funds are withdrawn in retirement.
The higher-income spouse can contribute as much as they want to the spousal RRSP without going over their limit (you don’t gain additional room for spousal RRSP contributions). The deadline to contribute to a spousal RRSP is the same as regular RRSPs (March 2).
For couples who are 65 or older, pension splitting is an option. Golombek explains that Canadians are allowed to allocate up to 50 per cent of their pension income — including withdrawals from a registered retirement income fund (RRIF), but not including CPP payments — to be deducted from your return and then included on your spouse or common-law partner’s return.
“This is beneficial when spouses are in different tax brackets,” Golombek says. He adds that pension splitting can also help the higher-income spouse avoid triggering OAS clawback, which happens when your income is above a certain threshold.
To split your pension income, you and partner must make a joint election on your income tax returns using Form T1032: Joint Election to Split Pension Income.
Golombek says for each $10,000 of pension income that you split with your spouse or partner, tax savings may be up to about $3,000 annually, depending on your province or territory and the spread between your respective tax rates.
Claim eligible expenses for child care, medication, moving and more
A claim (or deduction) reduces the income you are taxed on, while a credit lowers the tax owed. Essentially, a credit reduces the final tax bill, while a claimed deduction lowers the income used to calculate that amount. There are many types of expenses you can claim to reduce your taxable income. People often overlook medical expenses. Beyond prescriptions and eyeglasses, you may be able to claim therapy and travel for medical treatment if it was more than 40 kilometres away.
If you’re part of a private health services plan, such as Blue Cross or any type of private health insurance, that typically qualifies as a medical expense, Golombek points out. If you’re covered by your employer’s group health insurance but you have to pay an additional amount beyond what’s covered, those costs also qualify as a medical expense. “For some people, that could be thousands of dollars,” Golombek says.
If you worked from home in 2025 and you have a signed T2200 form from your employer, you can deduct home office expenses such as office supplies and long-distance calls for work purposes.
Depending on the age of their children and their family income, parents can claim certain child-care expenses, including daycare and day camps.
If you moved to a new home this year to work from a new location or to attend a post-secondary program as a full-time student, you can typically claim moving expenses such as transportation, storage and travel costs — as long as your new home is at least 40 kilometres closer to your new work location or school.
Those who are 65 or older, or who are eligible for the disability tax credit, can also claim up to $20,000 per year in eligible home accessibility expenses, which can include paid work completed by an electrician, plumber or architect.
‘Myriad of credits available’
Tax deductions can lower your taxable income whereas credits can reduce the tax owed. “There’s a myriad of tax credits available,” Golombek says. He suggests using tax software that will take you through a questionnaire to see what credits you may be eligible for.
For example, eligible families with an income of up to $150,000 can receive up to $6,000 per child younger than seven from the Ontario Child Care Tax Credit, which you can claim when filing your return. Eligible families can claim up to 75 per cent of their eligible child-care expenses.
If you donated to eligible charities in 2025 and have official donation receipts, you can claim 15 per cent on the first $200 of donations and then 29 per cent on the rest (up to 75 per cent of your net income). If you and your spouse both made donations, you can combine the amounts and claim them all on one partner’s tax return for a higher tax credit, Golombek says. You can also claim charitable donations from the past five years if you haven’t already.
You can find a list of deductions, credits and expenses you can claim to reduce your taxable income and amount owing on Canada Revenue Agency’s website.
File on time — even if you can’t pay right away
If you file your taxes after the April 30 deadline and you owe the CRA money, the penalty is five per cent of your 2025 balance owing, plus one per cent of your 2025 balance owing for each full month late (up to 12 months). If you were penalized for late filing in 2022, 2023 or 2024 and you’re late again, you’ll owe 10 per cent of your balance owing for 2025 plus two per cent of your balance for each full month late (up to 20 months).
Even if you’re certain you don’t owe money, you should still file on time, Golombek says. “If you’re wrong, you could really be in trouble.”
Plus, you could be missing out on money. Not filing your return on time means “you may miss out on various government benefits that are based on your reported income,” Golombek says. “That’s the main reason why people should file on time.”
The other reason is that you may claim a deduction that the CRA questions and disallows. “That could turn what would have been a refund into an amount owing, in which case, if you filed late, there’d be a penalty based on the amount that you owed,” Golombek explains. “My advice is always, always, always file on time.”
Even if you can’t pay your balance owing by the due date, file on time to avoid being charged a late-filing penalty.
Be proactive about 2026 taxes
It’s not too early to start thinking about saving on your 2026 taxes; while RRSPs have a deadline of March 2, contributions to TFSAs, FHSAs and charitable donations must be made by Dec. 31, 2026, to limit your 2026 tax burden.
This article was first reported by The Star
