How to plan your taxes for 2026 in Canada
A practical, step-by-step guide (with worked numbers)
Friendly, practical, and (mostly) painless — here’s a hands-on article to help you plan your 2026 taxes in Canada. I’ll cover what’s new/important for 2026, practical strategies (RRSP, TFSA, incorporation, income timing, credits), and show worked calculations so you can see exactly how the tax math plays out. I’ll cite authoritative sources and flag where numbers are still indexed or subject to change.
Short note on sources & certainty: I used CRA and major tax-advisor sources for the key rules (income-tax brackets, registered account limits, small business rules). Where numbers for 2026 are still indexed or legislated in stages, I say so and show assumptions. See the end of the article for a quick checklist and the main URLs. Confidence: High for the cited rules and 2025→2026 policy changes (e.g., lowest federal bracket at 14% for 2026); medium where 2026 thresholds may be indexed further.
Quick headlines you should know for 2026
The federal lowest personal tax rate will be 14% for the 2026 tax year (the government cut the lowest bracket effective July 1, 2025; full 14% applies for 2026).
RRSP maximum deduction limit for 2026 is $33,810 (this is CRA published limit). Use your Notice of Assessment for your personal limit (it includes pension adjustments, unused room).
TFSA annual $ limit is indexed; recent years were $7,000 and TFSA contribution room at the start of 2026 depends on your prior contributions/withdrawals — check CRA TFSA pages for exact personal room.
Small business / CCPC: the small business deduction (SBD) continues to provide a reduced federal rate (often cited as 9% for eligible active business income up to the business limit — check CRA for current thresholds and provincial interaction).
How to approach tax planning for 2026 — the four core steps
Inventory your 2025 & 2026 expected situation
Income sources: salary, bonus, rental, self-employment, dividends, capital gains, pension.
Registered plan balances & contribution room: RRSP, TFSA, RESP, pension adjustments.
Business structure: personally employed, self-employed, CCPC.
One-time events: home sale, stock sale, exercise of options, marriage/divorce, moving provinces.
Set the objectives (examples)
Reduce tax payable in the year (use RRSP, income timing).
Maximize after-tax retirement savings (RRSP vs TFSA tradeoffs).
Lower long-term effective tax on investment income (use TFSAs, capital gains planning).
For business owners: keep income inside corporation (when beneficial), use SBD, consider paying dividends vs salary.
Run scenario calculations (we’ll walk through examples below).
Use marginal combined federal + provincial rates to compute tax impact of RRSP, salary vs dividend, and capital gains.
Check alternative scenarios: defer income to next year or accelerate deductible expenses.
Lock mechanics & compliance
File/arrange contributions before deadlines (RRSP: contributions in first 60 days of next year can be applied to previous year; TFSA: timing rules for re-contribution after withdrawals).
Keep receipts, invoices, and evidence for credits/deductions.
Run your plan through your accountant if it’s complex (income-splitting, corporate re-organization, international items).
Important registered-account rules & examples
RRSP — why it matters
RRSP contributions reduce taxable income in the year you claim them; they grow tax-deferred and are taxed on withdrawal.
2026 RRSP annual maximum is $33,810 (CRA published). Your personal limit may be lower (18% of prior year earned income minus pension adjustments, plus unused room).
Example A: RRSP tax saving (Ontario resident, $80,000 income)
(assumptions: use 2025 CRA federal brackets indexed in 2025 and Ontario 2025 provincial brackets as proxy for 2026 — 2026 federal lowest rate is 14% as published; provincial brackets may be indexed in 2026):
Taxable income: $80,000.
Federal tax (using 2025 federal brackets with a 14% first bracket) — calculation steps:
First $57,375 at 14% = 57,375 × 0.14 = $8,032.50.
Remaining $22,625 taxed at 20.5% (second federal bracket) = 22,625 × 0.205 = $4,638.125.
Federal tax total ≈ $12,670.63. Canada.ca
Ontario provincial tax (2025 brackets):
First $52,886 at 5.05% = 52,886 × 0.0505 = $2,672.83.
Remaining (80,000 − 52,886 = 27,114) at 9.15% = 27,114 × 0.0915 = $2,478.84.
Provincial tax total ≈ $5,151.67. taxtips.ca
Total income tax (federal + provincial) ≈ $17,822.30 → effective tax rate ≈ 22.28%.
Marginal tax rate at $80,000: federal 20.5% + Ontario 9.15% = 29.65%. So each $1,000 of RRSP contribution reduces tax this year by about $296.50.
If you contribute $10,000 to an RRSP now, the immediate tax saving ≈ $10,000 × 29.65% = $2,965. (That’s the immediate cash-tax benefit; taxes are deferred until withdrawal.)
(Calculation done step-by-step and rounded to two decimals.)
Practical takeaway: For people with a combined marginal tax rate above ~20%, RRSP contributions are still a very effective immediate tax reduction tool — particularly if you expect to withdraw at a lower tax rate in retirement.
TFSA — tax-free growth & timing
TFSA earnings and withdrawals are tax-free. Contribution room accumulates, and withdrawals are added back to room the following year (not same year). The annual TFSA limit is indexed; recent annual limits were $7,000. Your personal room entering 2026 depends on your history of contributions and withdrawals.
When to use TFSA vs RRSP
Use TFSA if you expect a higher tax rate when withdrawing than today (e.g., younger people, those on low current marginal rates, or if you expect high tax rates later). Use RRSP when you need a larger immediate tax reduction and expect lower retirement tax rates.
You can split strategy: max TFSA for long-term tax-free growth and use RRSP if you need the current-year tax deduction.
RESP (education savings)
RESP contributions don’t generate a deduction but attract the Canada Education Savings Grant (CESG) and grow tax-deferred; withdrawals are taxed in the student’s hands (often low). Consider RESP if you have children and want to maximize grant matching.
Business owners & self-employed: top 2026 planning points
Income timing & salary vs dividend
Income left inside a CCPC taxed at small business rates (SBD) can be attractive; paying yourself salary triggers CPP contributions and reduces corporate tax base; dividends are taxed in the shareholder’s hand differently. Work through combined corporate + personal tax math when deciding split. CRA corporate rates / SBD details.
Small Business Deduction (SBD)
Eligible CCPCs can claim the SBD to reduce Part I tax; federal SBD is significant for active business income below the business limit — check current business limit amount and provincial interactions.
Passive income & tax on investment income inside corporations
Passive investment income generated inside a CCPC can affect the small business limit and the overall tax effect. If your company has significant investment income, get specialized advice — rules have been tightened in recent years.
Payroll, CPP, EI and remittance timing — keep on top of payroll remittances and rates (CRA payroll guides).
If you run a business, the single most valuable step is to talk to a tax advisor who can model corporation vs personal outcomes for your specific numbers. (The general rules are public but tailoring matters.)
Capital gains, dividends, and investment income — planning levers
Capital gains: only 50% of capital gains are taxable (the inclusion rate), so structuring investments to generate capital gains rather than interest income can be more tax efficient. Use TFSAs to shelter gains entirely. (CRA references on reporting capital gains are the place to verify rules.)
Dividends: eligible vs non-eligible dividends are grossed up and have dividend tax credits — the net effective rate depends on province & income level.
Interest: taxed at full marginal rates — often least efficient if held in a taxable account.
Example (capital gain vs interest): if your marginal rate is 30%, $1,000 of interest costs you $300 tax. But $1,000 of realized capital gain (not sheltered) produces $500 taxable (50% inclusion) × 30% = $150 tax. That’s why capital gains (and dividend credits) can be tax-advantageous vs interest.
Timing income & deductions — practical techniques
Defer income where possible (e.g., delay an invoice to Jan 2027 if you expect lower tax next year), but beware cash-flow and business realities.
Accelerate deductions into 2026 if you will be in a higher marginal band in 2026 (e.g., prepay business expenses; make earlier RRSP contributions that count for 2026/2027 depending on timing rules).
Bonuses: if you have control over when a bonus is paid, choosing which calendar year can change marginal rates and CPP/EI effects.
Capital losses can be used to offset capital gains (in the year or carried back/forward) — keep good records.
Credits & non-refundable vs refundable: don’t leave money on the table
Basic Personal Amount (BPA) reduces your federal tax via non-refundable credit. BPA has seen changes and indexing — check the CRA TD1 and CRA rates pages each tax season.
GST/HST credit, Canada Child Benefit, disability tax credit, medical expense claims, caregiver credits — identify credits you qualify for and ensure documentation.
Home office & self-employed: temporary and permanent rules can differ; legitimate business expenses reduce taxable income.
Worked example pack — three scenarios (numbers shown step-by-step)
Scenario 1 — Employee in Ontario (salary $80,000), RRSP decision
(We already computed the combined tax earlier; recap and show benefit of RRSP.)
Baseline tax (no RRSP): ~$17,822.30 total tax (federal + Ontario). Effective ≈ 22.28%. (See earlier calculation.) Canada.ca+1
If this taxpayer contributes $10,000 to RRSP and claims it in 2026:
Taxable income becomes $70,000.
New federal & provincial tax would be lower (re-compute using the bracket steps above if you want precise new totals).
Immediate cash tax saving ≈ $2,965 (marginal rate × $10,000). That’s disposable cash now to invest in RRSP. (You’ll pay tax when you withdraw later.)
Scenario 2 — Self-employed person with a small corporation
If business income is left in a CCPC and qualifies for the small business deduction (SBD), the federal corporate tax rate on active business income up to the business limit is significantly lower (around 9%), so you may prefer to retain profits in the corporation to reinvest. But drawing funds personally (salary vs dividends) has different personal tax consequences. Always model combined corporate + personal tax.
Scenario 3 — Saving for a child’s education vs retirement
RESP + CESG for education (maximize 20% CESG up to the grant limits).
TFSA for long-term tax-free growth (good for both shorter and longer horizons).
RRSP for retirement (immediate deduction + tax deferred growth). Use the combination that suits your timing needs and marginal rates.
Practical checklist for 2026 tax planning (action items)
Get your 2025 Notice of Assessment — find your RRSP room and carryforwards. (CRA My Account)
Estimate 2026 taxable income — list salary, bonuses, business profit, investment income.
Maximize low-hanging fruit:
Contribute to RRSP (if you want immediate deduction) — consider deadline windows.
Use TFSA room for tax-free growth.
If you have kids, check RESP contributions to capture CESG.
Plan for capital gains — consider timing of dispositions and use capital losses if available.
For business owners:
Model corporation vs salary/dividend for net after-tax cash.
Consider whether to retain earnings to use SBD and invest inside corporation.
Record keeping — receipts, invoices, investment statements.
Book a tax check — at least once a year with your accountant to run personalized scenarios (especially if you’ve had life or business changes).
Keep an eye on CRA announcements — indexing and rates may change; CRA is the authoritative source.
Common planning pitfalls to avoid
Over-contributing to TFSA or RRSP — CRA penalties can be stiff. Check your exact TFSA & RRSP room on CRA My Account.
Ignoring provincial differences — provinces levy different rates and credits (Ontario, Alberta, Quebec, etc.). Don’t rely purely on federal numbers when you live in a province with surtaxes or different brackets.
Using general rules for complex business structures — income-sprinkling, passive income inside CCPCs, and international income trigger specialized rules.
DIY tax-planning for major reorganizations — for incorporations, asset transfers, or income-splitting, get professional advice.
Where to check official numbers (quick reference links)
CRA — Federal and provincial income tax rates / payroll deductions (main authoritative page): and the payroll page for indexed thresholds: CRA — TFSA contribution rules & limits:
CRA — RRSP / registered plan limits:
CRA — Corporation tax rates & small business deduction: Ontario tax brackets (example provincial reference): TaxTips.ca summary for Ontario 2025/2026: (Useful for quick provincial numbers — always cross-check with provincial finance/CRA pages).
Final tips — annual rhythm for tax planning
January–March: collect slips (T4, T5, T3), estimate tax, do RRSP top-ups (first 60 days for last year rule), check TFSA room.
April–June: finalize business bookkeeping for the prior year; prepare tax-planning for year-end.
July–Dec: consider income timing, use corporate planning windows, review investment dispositions.
Finnaly whats Short & Practical
For 2026, expect a federal lowest rate of 14% — that reduces some tax on lower incomes; registered account limits are indexed (RRSP limit $33,810 for 2026). Use RRSPs if you need immediate tax relief and expect lower retirement rates; use TFSA for tax-free growth; business owners should carefully model retaining earnings vs paying out. Always check CRA for the final indexed thresholds and talk to a tax professional for complex moves.