Tax Tips and Planning

2026 TFSA limit is $7,000

The Tax-Free Savings Account (TFSA) limit is $7,000 for 2026. The limit was $7,000 for 2025 and 2024, $6,500 for 2023, $6,000 for 2022 to 2019, $5,500 for 2018 to 2016, $10,000 for 2015, $5,500 for 2014 and 2013 and $5,000 for 2009 to 2012. The total room available in 2026 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009 is $109,000.

Contributions can be made by Canadian residents aged 18 or over. Any unused contribution room can be carried forward. There is no lifetime limit to the amount of the contributions. If a person has contribution room, but no funds to contribute, they may contribute funds given to them by their spouse or common-law partner, with no attribution of income to the spouse or common-law partner. Note that a withdrawal in any year does not increase the TFSA room until the following calendar year. If you are thinking of making a withdrawal close to year end, make sure it is done by December 31 so you can have the withdrawal amount added back to the TFSA room sooner.

2026 RRSP Limit

The RRSP contribution limit is $33,810 in 2026 (up from $32,490 in 2025). The limit will increase to $35,390 in 2027. If you or your employer do not contribute to a pension plan, your 2026 “earned income” for RRSP purposes must be at least $196,611.11 to create RRSP contribution room of $35,390 in 2026. Please see the news release.

2026 FHSA Limit is $8,000

The First Home Savings Account (FHSA) limit was $8,000 in 2025, 2024 and 2023. Participation room begins accumulating in the year you open your first FHSA and is calculated on a calendar-year basis. Unused participation room can be carried forward, but in any given year you can only use up to $8,000 of carry-forward room in addition to the current year’s $8,000. As a result, someone who opened an FHSA in 2023 or 2024 or 2025 and has never contributed would have $16,000 of available room in 2026 ($8,000 from carry-forward and $8,000 for 2026).

The FHSA was introduced in 2023 to assist Canadians in purchasing their first home. Contributions to your FHSA are calculated on a calendar basis and start in the year you open your first account. Contributions are tax deductible and qualifying withdrawals are tax-free. The FHSA has a lifetime participation limit of $40,000 over 15 years, which includes contributions and transfers from your RRSPs. For more information, and to see if you qualify, please see CRA’s First Home Savings Account.

2026 Employment Insurance Rates

Employment Insurance (EI) rates for 2026 have decreased to 1.63% (from 1.64% in 2025) of earnings for employees. The maximum insurable earnings for 2026 increases to $68,900 from $65,700 in 2025. The maximum annual premium for employees increased to $1,123.07 (from $1,077.48 in 2025). The rate for employers is 1.4 times the employee rate or 2.282%. Therefore, the maximum employer premium for 2026 is $1,572.30 (up from $1,508.47 in 2025). Please see CRA’s EI premium rates and maximums.

2026 Canada Pension Plan Rates

The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2026 will be $74,600 – up from $71,300 in 2025.

Contributors who earn more than $74,600 are required to make additional payments (CPP2) on 4% of their income, up to $85,000 (maximum of $416). This amount applies to each of the employee and the employer, for more information, please see news release.

The basic exemption amount for 2026 remains at $3,500. Individuals who earn less than that amount do not need to contribute to the CPP.

The employee and employer contribution rates for 2026 have remained at 5.95% in 2026, and the self-employed contribution rate will remain at 11.9%.

The maximum employer and employee contribution to the plan for 2026 will be $4,230.45 and the maximum self-employed contribution will be $8,460.90. The maximums in 2025 were $4,034.10 and $8,068.20. For CPP2, the maximum is $416.00 and the maximum self-employed CPP2 contribution will be $832.

Canada Pension Plan for Persons Between Ages 60 and 70

Beginning in 2012, employers must withhold and remit CPP on wages paid to employees between ages 60 and 70, even if the employee is collecting CPP benefits. If the employee is between 65 and 70, they may file an election to opt out of paying CPP. These rules also apply to self-employed individuals. To avoid paying CPP, the election must be filed with CRA to take effect on the first of the following month. Please contact us for more information.

Employer Health Tax

As outlined in the 2020 Ontario Budget, the EHT exemption will remain at $1,000,000. Eligible employers who are members of an associated group are required to enter into an agreement to share the tax exemption using the Associated Employer Exemption Allocation Form. The next scheduled adjustment to the exemption for inflation will be on January 1, 2029. For more information, see the Ontario Ministry of Finance website.

Accelerated Capital Cost Allowance (CCA)

Accelerated CCA is available to eligible capital asset additions acquired between November 21, 2018, to December 31, 2027. Under the traditional half-year rule, only 50% of the normal CCA rate could be claimed in the year of acquisition. The Accelerated Investment Incentive temporarily increased this first-year deduction. For assets acquired from January 1, 2024, to December 31, 2027, the incentive is partially phased out. During this period, the usual half-year CCA amount is doubled, rather than tripled as it was for additions before 2024. For example: A Class 10 vehicle normally eligible for a 15% first-year CCA deduction would be allowed 45% in the year of acquisition if purchased before 2024, and 30% if purchased in 2024–2027. After the acquisition year, CCA will return to the normal rate on the remaining pool in the CCA class. Proposed amendments under Bill C-15 may further modify or extend accelerated depreciation measures, subject to legislative approval.

Tuition Credits

For 2025 federal tax purposes, the tuition credit is available.

Canada Carbon Rebate (CCR)

As of March 15, 2025, the Government of Canada discontinued the Canada Carbon Rebate for individuals. No further quarterly CCR payments will be issued after the April 2025 payment.

Capital Gains Exemption

The lifetime capital gains exemption for capital gains on qualified small business corporation shares and qualified farm property is $1,250,000 for 2025 but this increase has not been formally enacted into law. For 2026, indexation of the exemption amount is expected to resume.

Prescribed Interest Rates

The prescribed rates for the first quarter of 2026 are as follows:

• The interest rate charged on overdue taxes, Canada Pension Plan contributions, and employment insurance premiums will be 7%.
• The interest rate to be paid on corporate taxpayer overpayments will be 3%.
• The interest rate to be paid on non-corporate taxpayer overpayments will be 5%.
• The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 3%.
• The interest rate for corporate taxpayers’ pertinent loans or indebtedness will be 6.36%.

For more information, see CRA’s website on prescribed interest rates.

Proposed Changes Not Yet Law

• Lifetime Capital Gains Exemption (LCGE) – increase the LCGE to $1.25 million (from approximately $1.017 million) on the sale of qualified small business corporation shares and qualified farm and fishing property for dispositions occurring on or after June 25, 2024. The indexation of the LCGE will resume in 2026.
• Accelerated Investment Incentive (AII) – extend the AII for a five-year period, with a four-year phase-out after 2029. It would apply to qualifying property acquired on or after January 1, 2025, and available for use before 2030. Under the current rules, the AII is progressively phased out between 2024 and 2027.
• Immediate Expensing – immediate expensing for qualifying purchases of property in the asset classes 44 (patents), 46 (data network infrastructure equipment) and 50 (general‑purpose electronic data-processing equipment and systems software), if acquired on or after April 16, 2024, and available for use before January 1, 2027.
• Scientific Research & Experimental Development (SR&ED) – expand SR&ED ITC refundability and restore eligibility for capital expenditures, for taxation years that begin, and for property acquired, after December 15, 2024.

* plus GST/HST

See the Department of Finance News Release.

1. Consider paying reasonable salaries to family members before year end. Reasonable salaries can be deducted by your business and will be taxable to them at possibly lower rates.
2. Businesses should purchase capital assets before year end. Assets purchased and in use before the business year end are eligible for accelerated capital cost allowance rates. From 2024 to 2027, these accelerated rates are being phased out. (There is a proposal in place from Bill C-15 that the Accelerated Investment Incentive would be fully reinstated for qualifying property acquired on or after January 1, 2025, that becomes available for use before 2030. It would be phased out starting in 2030 and fully eliminated for property that becomes available for use after 2033 (as outlined in Table 3). Bill C-15 also proposed to reinstate the immediate expensing rules for Class 44 – patents or rights to use patented information, Class 46 – data network infrastructure equipment and related systems software and Class 50 – general purpose electronic data-processing equipment and systems software.
3. Owner-managers should consider their salary/dividend mix from their corporation. If you have drawn funds from your corporation throughout the year, you should determine whether these amounts should be characterized as salary or dividends or a combination before the year end. Ritchie Shortt & Tully LLP can help you with this decision.
4. Consider gifting funds or making interest-free loans to your spouse or an adult child to contribute to the Tax-Free Savings Account.
5. Consider selling investments with accrued losses before the end of the year to offset any gains you have had during the year. Capital losses in excess of gains can be carried back three years and forward indefinitely.
6. Contribute to your RRSP by March 2, 2026, to make the contribution deductible for 2025. Also remember to make your required Home Buyer’s repayment by March 2, 2026.
7. Charitable donations (gifts-in-kind contributions), medical expenses, political donations, childcare expenses, investment counsel fees, professional dues and contributions to the First Home Savings Plan should be paid by December 31 to be creditable or deductible in the calendar year.
8. Contribute to Registered Education Savings Plans for your children by December 31. Rather than an annual RESP contribution limit there is now a lifetime contribution limit of $50,000. When you contribute money to any RESP, the federal government will deposit an additional amount – the Canada Education Savings Grant (CESG) – equal to 20% of your contribution up to certain limits. The maximum CESG each year is $500 (20% x $2,500 contribution). The lifetime CESG limit is $7,200.
9. Direct Deposit – If you haven’t already set up direct deposit with the Canada Revenue Agency (CRA), it’s a good time to do so. This ensures that any refunds or benefits (such as GST/HST credits, child tax benefits, etc.) are deposited directly into your bank account, avoiding delays. You can do this online through your CRA “My Account”, through your Canadian bank or credit union, or by completing and mailing the Direct Deposit Form. By following these strategies and making the required contributions and payments by the appropriate deadlines, you can optimize your tax situation and potentially reduce your overall tax liability when filing your 2025 tax return in 2026. As always, it’s recommended to consult with us to tailor these strategies to your specific circumstances.

CRA now has a GST Registry on their website. The GST/HST Registry lets you validate the GST/HST number of a business, which helps to ensure that claims submitted for input tax credits only include GST/HST charged by suppliers who are registered for GST/HST. To get information to validate the GST/HST number of a business, you have to enter in the space provided the business name, the GST/HST number, and the date of the transaction in question. Access the registry.