Wealth Strategies: Year-end tax tips & planning

Year-end tax tips & planning

A good majority of us Canadians tend to only turn our full attention to taxes when the annual filing deadline draws near, but this should actually be top-of-mind as we close in on the end of the calendar year as well.  Specifically, you’ll need to utilize the tax credits that are available to you prior to the end of the year in order to take full advantage of them.  However, it seems that most Canadians are also not aware of how they can reduce their tax bill and therefore which credits to utilize.  Here are a few that aren’t generally well known, but can certainly make an impact on the tax bill for some as Jamie Golombek for Advisor.ca writes:

1. Pre-pay any 2017 Children’s Arts and Fitness Activities - There won’t be children’s arts or fitness tax credits in 2017, so pay for next year’s activities before Dec 31 to take advantage of the final year of credits. This could save clients up to $250 of expenses on artistic or cultural activities and up to $500 of expense on physical activity programs.
2. Renovate For Home Accessibility - The new Home Accessibility Tax Credit will permit a claim equal to 15% of up to $10,000 for renovations to assist seniors and those eligible for the disability tax credit to be more mobile or functional in their home.
3. Stock up on School Supplies - The new School Supply Tax Credit will help compensate teachers and early educators for school supply expenses they incur in the year.
4. Rebalance Corporate Class Mutual Funds - Currently, switching between corporate class mutual funds isn’t taxable, but starting Jan 1. 2017, new Federal rules mean it will be. Rebalance portfolios by the end of the year to avoid triggering a taxable disposition in the New Year.

Another item to consider is RESP contributions. If you want to maximize the Federal Grant on RESP contributions, these must be done by the end of the calendar year.  You can still contribute to the RESP in the following calendar year and receive Federal Grant (provided that the beneficiaries are age 17 or younger) but you can potentially miss out on grant carry-forward from prior years where maximum grant wasn’t received.  The current maximum annual contribution is $2,500 per beneficiary with the matching Federal grant being 20%; however, you can catch-up on missed grant for one prior year to a maximum of $5,000 per beneficiary per year.

We thankfully still have time for RSP contributions in the coming year given the first-60-days rule, but if one is currently having a lower-income year, and would like to withdraw additional funds from their registered account (to take advantage of a lower marginal tax rate), one would need to do so before year-end.  This could mean withdrawing funds from a variety of registered accounts such as an RSP, RIF, LIRA, LIF, or combination thereof, depending on the circumstance.  

Tax loss selling may also be a consideration if you want to crystallize losses to potentially negate other capital gains.  A good review of one’s non-registered holdings would therefore be a prudent thing to do before year-end.

And so, with just a little advance planning, you can use the available tax incentives to their best advantage, and save a little green in the process.