# name: optimizing-canadian-personal-taxes description: Plans legal Canadian personal income-tax reduction - RRSP vs TFSA vs FHSA priority, legal income splitting, capital-gains timing with the superficial-loss rule, asset location, donation and RESP strategies. Use when the user asks how to lower or optimize their Canadian personal taxes, whether to contribute to RRSP or TFSA or FHSA, about spousal RRSPs, pension splitting, the superficial-loss rule, RESP grants, or year-end Canadian tax moves. Do not use for preparing the T1 return itself (preparing-canadian-personal-tax-returns), corporate or owner-manager planning (optimizing-business-taxes), or US planning (optimizing-us-personal-taxes).

# Optimizing Canadian Personal Taxes

# When to use / when NOT to use

• Use for: planning moves that legally reduce a Canadian individual's income tax — registered-account priority, splitting, harvesting, asset location, donations, RESP.
• Do NOT use for: completing the T1 and schedules, CCPC owner compensation, US taxes, or Québec-specific mechanics beyond noting QC differs.

# Important limits

• Educational planning help, not professional advice — the user must verify strategies with a CPA or tax professional before acting.
• All figures are tax-year-stamped and MUST be verified against canada.ca before use; limits and brackets change annually.
• Legal avoidance only — never assist with unreported income, fabricated expenses, or sham transactions. Refuse and say why.

# Core strategies

1. Capture any employer RPP/group-RRSP match first — guaranteed return before any other move.
2. RRSP vs TFSA by marginal-rate comparison. RRSP wins when today's marginal rate exceeds the expected retirement rate (deduct high, withdraw low); TFSA wins otherwise, or when flexibility matters (withdrawals restore room the following year). ✅ A $130k earner (26%+ federal) prioritizes RRSP; a $45k earner prioritizes TFSA. ❌ Default to RRSP at low income, converting a 14%-rate deduction into 20%+-rate withdrawals later.
3. First-time homebuyer → max the FHSA before non-matched RRSP. It is deductible like an RRSP AND tax-free on qualifying withdrawal like a TFSA — strictly better for a house down payment. ✅ $8,000/yr to FHSA (lifetime $40,000), then RRSP/TFSA. ❌ Use the RRSP Home Buyers' Plan first while FHSA room sits unused.
4. Split income only through legal channels: spousal RRSP (higher earner deducts, lower earner withdraws after the 3-year attribution window), pension income splitting (up to 50% at 65+), giving the spouse money to fund their own TFSA (no attribution in a TFSA). ✅ Spousal RRSP to equalize retirement incomes. ❌ Sprinkle private-corporation dividends to family — TOSI taxes it at the top rate.
5. Harvest losses respecting the superficial-loss rule: no repurchase of the identical property 30 days before/after by you, your spouse, or accounts you control (RRSP/TFSA included) — the loss is denied and added to the repurchaser's cost base. ✅ Sell the losing Canadian equity ETF, buy a different-index ETF the same day. ❌ Sell for the loss while the spouse's TFSA buys the same fund that week.
6. Asset location: shelter interest-bearing assets (fully taxed) inside RRSP/TFSA first; keep Canadian eligible-dividend and capital-gains assets in taxable accounts (dividend tax credit, 50% gain inclusion).
7. Donations: pool spouses' donations on one return and consider carrying forward (up to 5 years) to clear the ~$200 threshold where the credit rate jumps.
8. RESP: contribute $2,500/child/year to capture the 20% CESG ($500/yr, lifetime $7,200) before any additional TFSA/RRSP beyond the match.

# Workflow

1. Collect: province, income by type, marginal rate, RRSP/TFSA/FHSA room (from CRA My Account), family situation (spouse income, kids, first-home status).
2. Place the user on the 2026 federal bracket table; note the provincial layer exists.
3. Apply strategies 1–8 in order; skip inapplicable ones and say why.
4. State each deadline: TFSA anytime (room restores Jan 1); RRSP deduction deadline = 60 days into the next year; harvesting = settlement by Dec 31; RESP = Dec 31 for that year's grant.
5. Validate: model the tax outcome with and without the moves using actual numbers and the user's real contribution room; confirm no limit is exceeded and no superficial-loss window is violated. Present both scenarios.

# Current figures (tax year 2026 — verify before use)

# Edge cases

• Québec residents → provincial return and rates differ substantially; flag it.
• US citizens in Canada → TFSA/FHSA/RESP have US tax complications; route to cross-border professional advice.
• Attribution rules → money gifted to a spouse for taxable investing attributes income back; only the TFSA/spousal-RRSP channels above are clean.
• User asks to hide income or fabricate expenses → refuse, state it is illegal, offer the legal alternatives above.

# References

Decision tables, worked math, and traps: see references/reference.md.