A prominent Canadian financial planner is urging households to think long term about taxes as new rules and rising incomes change how much people pay over a lifetime. Speaking this week, Jason Heath warned that chasing annual refunds can backfire, arguing Canadians should instead plan for their “lifetime tax” with the Canada Revenue Agency in mind.
“If you really want to keep the CRA’s hand out of your pocket, focus on your lifetime tax.” — Jason Heath
Heath’s message lands as families weigh retirement strategies, capital gains exposure, and benefit clawbacks. The advice comes during a period of policy change, including a higher capital gains inclusion rate for larger gains, which has sparked fresh interest in when to realize income and how to spread it over time.
Why Lifetime Tax Beats Annual Refunds
Analysts say the obsession with refunds often masks bigger costs down the road. Deferring income without a plan can push retirees into higher brackets when required withdrawals begin. It can also trigger clawbacks on public benefits.
Accountants point to a common pattern: aggressive saving in registered plans during high-earning years, followed by large withdrawals that overlap with Canada Pension Plan (CPP) and Old Age Security (OAS) income. That mix can raise tax rates in retirement and reduce OAS benefits once income crosses the clawback threshold.
Heath’s view aligns with a growing consensus: spread taxable income across decades, not just between February and April. That means weighing the tax hit on each dollar now versus later, and choosing accounts accordingly.
Policy Shifts Raise Stakes for Planning
Budget changes in 2024 lifted the capital gains inclusion rate for corporations and trusts, and for individuals on gains above a set annual amount. Advisors say this has put timing at the forefront for business owners and investors with appreciated assets. Selling in one large block may no longer be optimal.
The TFSA limit also rose again in 2024, lifting the cumulative room for someone eligible since 2009 to $95,000. That expansion strengthens the case for moving interest and growth into tax-free space, especially for those near benefit thresholds.
RRSPs remain a key tool, with annual limits tied to earned income and a dollar cap each year. But planners caution that a large RRSP can become a large RRIF, forcing taxable withdrawals that collide with CPP, OAS, and even part-time work. The policy trend, they say, rewards diversification across account types.
Strategies That Can Lower Lifetime Bills
Experts recommend building a map of income sources, tax brackets, and benefit thresholds from mid-career through late retirement. The goal is to avoid big spikes that invite higher marginal tax and clawbacks.
- Mix account types: TFSA for growth, RRSP for high-earning years, non-registered for dividend and capital gains flexibility.
- Consider early, modest RRSP/RRIF withdrawals before OAS begins to smooth income.
- Time capital gains: spread disposals across years to manage inclusion and credits.
- Coordinate CPP and OAS start dates with expected withdrawals and part-time work.
- Use pension splitting and spousal RRSPs to balance incomes in retirement.
Independent tax lawyers add that estate plans should align with this approach. Named beneficiaries on registered accounts can avoid delays, but taxes on final RRSP/RRIF income can be steep if most wealth sits in one registered bucket. Charitable giving strategies, such as donating appreciated securities, may reduce taxes on final returns.
What The Numbers Mean For Households
For a mid-career saver, this framework often starts with filling TFSA room to protect future investment growth. In high-income years, RRSP contributions can still make sense, but only with a plan for withdrawals that keeps retirement income within target brackets.
For pre-retirees, small, planned RRSP withdrawals in their 60s—before mandatory RRIF rules kick in—can lower lifetime tax by preventing higher withdrawals later. Investors with large unrealized gains may benefit from partial sales over several years, paired with loss harvesting where available.
Heath’s core point is simple but easy to overlook: the right move is not always the one that maximizes this year’s refund. The winning strategy is the one that results in a lower total tax bill from now through the estate.
As tax season planning gives way to midyear portfolio reviews, advisors expect more clients to revisit withdrawal timing, TFSA allocations, and the mix of registered and non-registered savings. The next federal updates—and any changes to benefit thresholds or investment taxation—will shape those choices. For now, the guidance is clear: map your income across decades, not months, and measure success by lifetime tax paid, not the size of a single refund.
