Tax-Saving Strategies for Investors in 2025

There’s no getting around paying taxes, but there are some tax-saving strategies investors can consider to lower their tax liability. If you’re a Canadian investor looking to protect your returns in 2025, smart tax planning matters just as much as smart investing.

Here are some strategies to help reduce your tax bill without cutting corners.

1. Maximize TFSA Contributions

The Tax-Free Savings Account (TFSA) remains one of the most powerful tools for Canadian investors. In 2025, the annual contribution limit is $7,000.¹ You do not need to have earned income to contribute to a TFSA. Your TFSA contribution room limits the maximum amount that you can contribute to your TFSA. Investments grow tax-free, and withdrawals are never taxed.

Tip: Use your TFSA for growth-oriented assets like ETFs or stocks. The bigger the gains, the bigger the benefit.

2. Don’t Overlook the RRSP

Registered retirement savings plans (RRSPs) offer immediate tax deductions and tax-deferred growth. Your contribution limit for 2025 is 18 percent of your 2024 income, up to $32,490.²

To make the most out of your RRSP, consider contributing during high-income years for maximum deduction impact and then reinvesting the refund into your TFSA or back into the RRSP if you have room.

3. Time Your Capital Gains Right

Only 50 percent of capital gains are taxable in Canada. But the timing of when you sell matters. You can harvest losses if some of your investments are down by selling to realize a loss and offset gains. Conversely, you can delay selling profitable investments until you’re in a lower-income year.

4. Use Dividends to Your Advantage

Due to the dividend tax credit, Canadian dividends from eligible corporations are taxed at a lower rate within non-registered accounts.³ This makes them particularly attractive for taxable accounts.

But remember, foreign dividends (like U.S. stocks) don’t get this credit and are fully taxable, so consider holding them in RRSPs instead, where U.S. withholding taxes are also avoided.

5. Split Income Where You Can

If you’re married or have a common-law partner in a lower tax bracket, income splitting can reduce your household tax bill.

For example, you can let the higher-earning spouse contribute to a spousal RRSP for tax savings today and balanced income later. If you’re 65 or older, you can split up to 50 percent of your eligible pension income.

6. Consider an RESP for Education Savings

If you’re investing for your child’s future, the registered education savings plan (RESP) is a smart, tax-efficient way to grow funds for post-secondary costs.

While RESP contributions aren’t tax-deductible like RRSPs, the real benefit comes from tax-deferred growth and government matches.

First, investment earnings inside the RESP aren’t taxed as long as they stay in the plan.⁴ This means your returns compound faster, and your money works harder.

Second, the government offers the Canada Education Savings Grant (CESG), which adds 20 percent to your annual contributions, up to $500 per year per child (and a lifetime maximum of $7,200).⁵ So, if you contribute $2,500 in a year, you’ll get the full $500 grant.

When it’s time to use the funds, the withdrawals are taxed in your child’s hands, not yours. Since most students have little to no income, the tax owed is often minimal or zero.

Even if your child ends up not attending college or university, an RESP still offers flexibility. You can transfer up to $50,000 of the income earned in the RESP into your RRSP, provided you have room, allowing you to keep the tax deferral going.⁶

Tax planning is about keeping more of what you’ve earned and, ideally, paying less in taxes. Use these strategies to build a portfolio that’s not just profitable but also tax-smart.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.