Feeling out of sorts as the year winds down? Consider these tax strategies for seniors

By the Editorial Team · Thursday, October 22, 2026

Seniors are advised to implement year-end tax planning strategies such as managing Old Age Security clawbacks, optimizing RRSP and RRIF withdrawals, and timing TFSA contributions to minimize tax liabilities. These actions can help retirees preserve more income by reducing taxable amounts and taking advantage of credits and income splitting before the 2027 tax year begins.

As the end of 2026 approaches, seniors may want to consider several tax planning strategies to optimize their financial situation and minimize tax liabilities. These measures are especially relevant given the specific rules affecting retirement income and government benefits such as Old Age Security (OAS).

One important consideration is the OAS clawback threshold, which for 2026 is set at a net income of $95,323. Income exceeding this amount results in a reduction of OAS benefits by 15 cents for each dollar over the limit. Seniors close to this threshold may benefit from deferring capital gains or additional Registered Retirement Income Fund (RRIF) withdrawals until after the new year. Careful attention is also needed regarding dividend income since eligible dividends are grossed up by 38 percent, potentially pushing net income above the clawback point.

Conversely, those with modest incomes might consider withdrawing more from their Registered Retirement Savings Plans (RRSPs) or RRIFs than immediately required. Taking withdrawals at lower tax brackets now can be more advantageous than incurring higher taxes later, particularly as larger RRIF balances are subject to minimum withdrawals that may be fully taxed at death. Reducing RRIF balances earlier also helps lower future mandatory withdrawals.

Seniors aged 65 and older can claim a federal pension credit on up to $2,000 of eligible pension income annually. Those without pension income may want to convert a portion of their RRSPs into RRIFs to withdraw this amount, effectively reducing taxes at lower income levels. This approach can be repeated each year until age 71.

Income splitting remains a valuable tool for married couples, allowing up to half of eligible pension income to be allocated to a spouse. This includes defined-benefit pensions at any age and RRIF withdrawals after age 65. Income splitting often lowers the combined tax burden and can help both spouses remain under the OAS clawback threshold, which is assessed individually.

For individuals turning 71 in 2026, the RRSP-to-RRIF conversion deadline is December 31. Those with earned income this year have the option to make RRSP contributions for 2027 before year-end, although this may incur a one-percent penalty for excess contributions held for a month. If a spouse is younger, calculating RRIF withdrawal minimums based on their age may reduce taxable income.

Tax-Free Savings Account (TFSA) withdrawals should ideally be timed before December 31 if funds are needed in early 2027. Withdrawals made before the year’s end restore contribution room immediately on January 1 rather than a year later. With the anticipated TFSA contribution limit increasing to $7,500 in 2027, this strategy could provide valuable flexibility. Additionally, moving excess RRIF withdrawals into a TFSA can shield income from OAS clawbacks, as TFSA withdrawals do not affect the calculation.

Capital losses realized through selling investments can be used to offset current year capital gains or those from the previous three years. With the settlement cycle now one business day after trade date, transactions must be completed by December 30 to count for this year. Taxpayers must also be mindful of the superficial loss rule, which denies a loss if the same security is repurchased within 30 days by the individual, spouse, RRIF, or TFSA.

Donating publicly traded securities with accrued gains directly to registered charities by December 31 can help seniors avoid capital gains tax while receiving a donation receipt for the fair market value. This offers a tax-efficient way to support causes without reducing investment proceeds.

Maximizing medical expense claims can also be beneficial. Taxpayers can select any 12-month period ending within the year to optimize deductions, often best synchronized with the lower-income spouse’s return. Prepaying substantial medical bills by year-end may accelerate credits. Additional credits such as the home accessibility tax credit, disability tax credit, and attendant care costs can also reduce tax burdens.

Finally, seniors are encouraged to ensure timely payment of quarterly tax instalments by December 15 to avoid interest charges or make early payments to reduce interest on underremitted taxes. Those experiencing reduced income can request adjustments to OAS clawback withholdings using the appropriate forms. Reviewing beneficiary designations on registered plans is also recommended to ensure alignment with personal and estate planning goals.

By carefully assessing income levels and timing transactions before year-end, seniors can navigate complex tax rules more efficiently and potentially preserve more of their retirement income.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.