Maximizing Your 2025 Tax Deductions Before It’s Too Late
While 2025 has ended, there are still strategic moves you can make in early 2026 that count toward your 2025 tax return. More importantly, now is the perfect time to review what you may have missed and ensure you’re claiming every legitimate deduction available to reduce your CRA tax bill.
At BBS Accounting in Toronto, we’ve helped countless Ontario business owners and individuals discover thousands of dollars in overlooked deductions. Many taxpayers leave money on the table simply because they don’t know what qualifies or they lack proper documentation.
Time-Sensitive Opportunities Still Available
Even though the calendar has turned to 2026, certain contributions and payments made by specific deadlines can still count toward your 2025 tax year.
RRSP Contributions: You have until March 2, 2026 to make RRSP contributions that reduce your 2025 taxable income. For 2025, you can contribute up to $31,560 (or 18% of your 2024 earned income, whichever is less), plus any unused contribution room from previous years.
RRSP contributions are deductible from your income, meaning if you’re in the 30% tax bracket and contribute $10,000, you’ll save approximately $3,000 in combined federal and Ontario taxes. This is one of the most powerful tax reduction strategies available.
If you’re self-employed and have a profitable year, last-minute RRSP contributions before March 2 can significantly reduce your tax bill. At BBS Accounting, we help clients calculate optimal contribution amounts based on their specific income and tax situation.
Often-Missed Business Deductions for Ontario Entrepreneurs
Let’s review common deductions that Ontario business owners frequently overlook or underutilize.
Home Office Expenses: If you operate your business from home in Toronto or anywhere in Ontario, you can deduct a portion of your household expenses. The space must be your principal place of business, or used exclusively for business and for meeting clients regularly.
You can deduct a proportionate share of rent, mortgage interest (not principal), property taxes, home insurance, utilities (heat, electricity, water), maintenance and repairs, and internet costs. If your home office occupies 15% of your home’s square footage, you can deduct 15% of these eligible expenses.
For a Toronto home where annual property taxes are $6,000, utilities are $3,000, insurance is $2,000, and mortgage interest is $15,000, a 15% business use percentage generates $3,900 in deductions annually.
Don’t forget that if you employ family members who work from their homes, their home office expenses may also be deductible as business expenses.
Motor Vehicle Expenses: Whether you use the detailed method or simplified rate, vehicle deductions can be substantial for Ontario businesses. Track every business kilometre you drive.
For 2025, you can use the CRA’s automobile allowance rates: 70 cents per kilometre for the first 5,000 kilometres and 64 cents for each additional kilometre. If you drove 20,000 business kilometres, that’s $13,100 in deductions using the simplified method.
Alternatively, use the detailed method by tracking actual costs (fuel, insurance, licence and registration, maintenance and repairs, leasing costs or CCA) and applying your business-use percentage. If your vehicle is 75% business use and total costs were $12,000, you can deduct $9,000.
Remember, commuting from home to a regular place of business isn’t deductible. However, travel from your home office to client locations, between business locations, or to temporary work sites is fully deductible.
Professional Fees and Dues: Fees paid to BBS Accounting or any other accounting firm for tax preparation, bookkeeping, and business advice are fully deductible. So are legal fees related to your business, consulting fees, professional association dues, and business licence fees.
Many Ontario professionals must maintain memberships in regulatory bodies like the Law Society of Ontario, Ontario College of Teachers, or College of Physicians and Surgeons. These fees are deductible.
Business Meals and Entertainment: You can deduct 50% of reasonable business meal costs when you meet with clients, potential clients, suppliers, or business associates to discuss business. This includes meals during business travel.
Keep detailed records including the date, location, attendees, business purpose, and amount. A quick note on the receipt or in your calendar is sufficient documentation for CRA purposes.
For a typical Toronto business lunch costing $60, you can deduct $30. If you have business meals twice weekly, that’s approximately $3,000 in annual deductions.
Advertising and Promotion: Every dollar spent promoting your Ontario business is deductible. This includes Facebook and Instagram ads, Google AdWords, website design and hosting, business cards and brochures, sponsorships of local Toronto events, promotional items with your logo, and trade show expenses.
Digital marketing has become essential for most businesses. If you spent $500 monthly on online advertising, that’s $6,000 in deductions annually.
Insurance Premiums: Business liability insurance, professional liability insurance (E&O), commercial property insurance, and business interruption insurance are all fully deductible.
If you’re self-employed, you can also deduct health and dental insurance premiums for yourself and your family on line 33099 of your T1 return. This is an often-missed deduction worth thousands annually for Ontario entrepreneurs.
Software and Technology: Every software subscription and technology tool you use in your business is deductible: accounting software like QuickBooks or Sage, customer relationship management (CRM) systems, project management tools, Microsoft 365 or Google Workspace, website hosting and security, industry-specific software, and cloud storage services.
Review your credit card statements for recurring technology charges. These small monthly fees add up to significant deductions.
Office Supplies and Equipment: Paper, pens, printer ink, filing supplies, and every other office item is deductible. For equipment purchases under $500, you can expense them immediately rather than claiming Capital Cost Allowance over time.
Telephone and Internet: If you use your cell phone and internet for business, the business-use portion is deductible. If your phone is 80% business use and your monthly bill is $100, you can deduct $80 monthly or $960 annually.
Bank Fees and Interest: Business bank account fees, credit card processing fees for customer payments, merchant services fees, and interest on business loans or lines of credit are all deductible. Even monthly account fees of $15 represent $180 in annual deductions.
Bad Debts: If you use accrual accounting and have invoices from clients who clearly won’t pay, you can write these off as bad debts. You must have previously included this income in revenue and made reasonable collection efforts.
For Toronto service businesses dealing with unpaid invoices, this deduction can be significant. Document your collection attempts (reminder emails, phone calls, demand letters) before claiming the bad debt deduction.
Business Portion of Property Taxes: If you own commercial property in Toronto or Ontario for your business, property taxes are fully deductible. With Toronto’s commercial property tax rates, this can represent substantial deductions for property owners.
Deductions for Incorporated Businesses
If you operate as a corporation in Ontario, additional deductions and strategies are available.
Salary vs. Dividend Decisions: Pay yourself a salary to create RRSP contribution room and claim CPP contributions as business expenses. Alternatively, pay dividends to benefit from lower corporate tax rates and dividend tax credits. The optimal mix depends on your personal situation.
At BBS Accounting, we model different scenarios to determine the most tax-efficient compensation strategy for each client’s circumstances.
Management Bonuses: Accrue a bonus to yourself or other shareholders before year-end, then pay it within 179 days of your fiscal year-end. This allows you to claim the deduction in the lower-income year while deferring personal tax.
Small Business Deduction Planning: Ensure you’re maximizing access to the 12.2% small business tax rate on the first $500,000 of active business income by managing your active versus passive income mix.
Ontario-Specific Deductions and Credits
As an Ontario resident, several provincial deductions and credits are available that many people overlook.
Ontario Political Contribution Credit: Contributions to registered Ontario political parties generate tax credits of 75% on the first $486, 50% on amounts from $487 to $1,213, and 33.33% on amounts from $1,214 to $3,035. Maximum credit is $1,587.
Ontario Focused Flow-Through Share Tax Credit: A 5% credit for flow-through share investments in certain mining and mineral exploration companies, in addition to federal credits.
Ontario Innovation Tax Credit: If your business conducts research and development in Ontario, the 8% OITC is in addition to federal SR&ED credits, providing combined credits up to 59% for qualifying expenditures.
Ontario Business-Research Institute Tax Credit: A 20% refundable credit on payments to eligible research institutes, helping businesses offset costs of contracting university research.
Personal Tax Deductions Often Missed
Beyond business deductions, Ontario residents should ensure they’re claiming these personal deductions:
Moving Expenses: If you moved at least 40 kilometres closer to work or school (or to run a business), you can deduct moving costs including transportation, storage, temporary lodging (up to 15 days), and costs of selling your old home and buying a new one.
Toronto’s real estate costs make moving expensive. If you sold your Toronto home and purchased another, real estate commissions, legal fees, and land transfer taxes can generate significant deductions if you meet the distance and timing requirements.
Childcare Expenses: The lower-income spouse can generally deduct childcare costs up to $8,000 per child under 7, $5,000 per child aged 7-16, and $11,000 per child eligible for the disability tax credit. This includes daycare, day camps (but not overnight camps), nannies, and babysitters.
Keep detailed records including the caregiver’s name, address, SIN or business number, amounts paid, and receipts.
Interest on Student Loans: Interest paid on government student loans (Canada Student Loans or Ontario Student Assistance Program loans) is eligible for a 15% federal credit plus Ontario credit. You can carry forward unused amounts for up to five years.
Union and Professional Dues: Membership fees for unions or professional associations required for your job are deductible. For many Ontario workers, this includes teacher federation dues, engineering association fees, and nursing college fees.
Employment Expenses: If you’re required to pay employment expenses and your employer provides a signed T2200 form, you can deduct supplies, home office costs, vehicle expenses, and other costs. This is common for commission salespeople and some professionals.
Medical Expense Claims
Medical expenses are one of the most commonly under-claimed deductions. You can claim expenses for yourself, your spouse, and dependent children exceeding the lesser of 3% of your net income or $2,635.
Eligible expenses include prescription medications, dental services not covered by insurance, vision care including glasses and contacts, medical devices like hearing aids or wheelchairs, home modifications for disabled access, certain medical travel expenses, private health insurance premiums not paid by an employer, and fees for many health practitioners including physiotherapists, psychologists, and naturopaths.
For a Toronto family with braces for two children ($8,000), uncovered dental work ($2,000), and glasses ($800), total medical expenses of $10,800 likely exceed the 3% threshold, generating valuable tax credits.
Charitable Donations Strategy
Charitable donations to registered Canadian charities generate tax credits of 15% federally plus Ontario’s rate on the first $200, then 29% federal plus Ontario’s top rate on amounts above $200.
If you donate $1,000, the tax credit is approximately $400 to $500 depending on your income level. For high-income earners, the combined federal-Ontario credit on donations above $200 approaches 50%.
Consider these strategies: donate appreciated securities instead of cash to avoid capital gains tax while claiming the donation credit. Carry forward unused donation amounts for up to five years to use when income is higher. Bundle two years of donations into one year to exceed the $200 threshold for the higher credit rate.
Capital Cost Allowance Optimization
For business assets, you can choose how much CCA to claim each year, from zero to the maximum rate. Strategic CCA planning can be valuable.
In low-income years, consider claiming less CCA to preserve deductions for higher-income years. CCA is optional, unlike most deductions which must be claimed when eligible.
However, for assets like vehicles and computer equipment that decline in value quickly, claiming CCA sooner is usually optimal.
Don’t Forget Split Income Attribution
Ontario business owners should be aware of income splitting opportunities and restrictions. Paying reasonable salaries to family members who genuinely work in your business is legitimate tax planning.
However, Tax on Split Income (TOSI) rules restrict income splitting through family trusts and corporate structures. At BBS Accounting, we help clients navigate these complex rules to implement legitimate income splitting while avoiding TOSI penalties.
Track Everything Throughout the Year
The biggest reason people miss deductions is poor record-keeping. Starting now for 2026, implement these practices:
Save every business receipt, paper or digital. Use accounting software that connects to your bank accounts and automatically imports transactions. Photograph receipts immediately with your phone and store in cloud folders. Track mileage in real-time with GPS apps like MileIQ. Keep a log of business meals including attendees and purposes. Document home office square footage and household expenses monthly.
At BBS Accounting, we recommend QuickBooks Online for most small businesses. It integrates with your bank accounts, categorizes transactions, and generates reports that make tax preparation simple.
Working with BBS Accounting
Tax planning is most effective when it’s proactive rather than reactive. While this article focuses on maximizing 2025 deductions, the real opportunity is implementing systems and strategies now for 2026 and beyond.
Our Toronto team at BBS Accounting provides year-round tax planning and advice, not just annual tax preparation. We help clients identify deductions in real-time, make strategic timing decisions, and implement record-keeping systems that eliminate year-end scrambles.
Whether you’re a sole proprietor, partnership, or corporation operating in Toronto and the GTA, we can help you pay less tax legally while staying fully compliant with CRA requirements.
Review and Amend If Necessary
If you’ve already filed your 2025 return and realize you missed significant deductions, you can file a T1-ADJ (T1 Adjustment Request) to amend your return. The CRA allows adjustments for up to 10 years in most cases.
Even if you filed returns for 2023 or 2024 that missed major deductions, it’s not too late to amend those returns and claim refunds.
The Bottom Line
Most Ontario taxpayers and business owners pay more tax than necessary simply because they don’t claim all available deductions. The CRA won’t tell you what you missed – it’s your responsibility to identify and claim every legitimate deduction.
Review this list carefully, gather your documentation, and ensure your 2025 return reflects every deduction you’re entitled to claim. Better yet, contact BBS Accounting for a comprehensive review. Our detailed analysis often uncovers deductions that more than pay for our professional fees.
The tax code is complex, but it also provides numerous opportunities for those who understand it. Make maximizing deductions part of your financial strategy, and you’ll keep more of what you earn year after year.
Contact BBS Accounting today to schedule a consultation and discover how much you could be saving on your Ontario and federal taxes.
