Year End Tax Planning

Is there anything more boring in November than thinking another year is almost over? Christmas is around the corner and you have to stop and think about whether you have taken advantage of any tax strategies before the end of the year.

Well unfortunately we need to save taxes where ever we can and so now is the time to do it.

1. Charitable giving: Since we know that people are more generous around the holidays, you may want to bump up any donations to your favourite charities. Not only will it help someone else, Canada Revenue Agency will give you some of those dollars back. Remember at tax preparation time to combine all receipts on one tax return for the bigger tax credit.

2. RRIF Conversion: If you turned 71 this year or will before the end of the year, you will need to convert your RRSPs to a RRIF by December 31st. Failure to do so will cause your RRSP to be fully taxed upon filling your tax return. Way too much tax money to give to the tax man all at once.

3. Triggering Capital Gains: If you are planning on selling some stocks or mutual funds with a large capital gain, you may want to put off until the New Year or sell half now and half in the New Year to spread the capital gains over two tax years.

4. Loss Selling: If you have already crystallized capital gains this year, you may want to consider any investments with losses and sell them out before December 31st . The losses can offset gains and could save you lots of tax dollars.

5. Buying non-registered investments: If you are planning to purchase any nonregistered investments that pay dividends or have year-end distributions, as in the case of mutual funds, you may want to hold off until after the dividend date or purchase in the New Year. This way you will save the income that would have to beadded as taxable income. Purchasing ex dividend/distribution also means you buy at a lower price.

6. Flow-Through Investments: If you need big tax savings, you may want to consider a Flow through investment. This you will want to discuss with your investment advisor and/or accountant to make sure this type of investment is suitable to your situation. You can be rewarded with big tax savings but you must understand the risks.

7. TFSA: Although there is no time limit on topping up your Tax Free Savings Account or immediate tax savings on your contributions, you may want to make sure you do not have cash and/or investments causing you a tax problem while you have room to shelter money in your TFSA.

8. RESP: Registered Education Plans should be topped up before the end of December to get the full 20% government grant. Otherwise there may be a possibility of never maximizing the government’s offer of free money.

Now this certainly wouldn’t be an exhaustive list but between your accountant and investment advisor I am sure that most tax savings should be covered and discussed for your personal situation.