With the end of the year quickly approaching, this is a good time to be thinking about our financial affairs in preparation for the year end. December 31st is the deadline for many tax-related activities. As you consider the opportunities to best position yourself, here are some ideas:
Capital Gains/Losses: Consider realizing capital losses to offset realized capital gains for 2021, or take advantage of the carry- back rules to recover taxes paid on taxable capital gains realized in three preceding taxation years. There may also be opportunities to transfer capital losses between spouses. In order to do this, please get in touch well before the end of the year.
Income Splitting: There are various ways to split income. For example, you may pay reasonable salaries to spouses for services provided to your self-employed business or private company. You may elect to split eligible pension income with a spouse on your tax return. With interest rates at low levels, income splitting with a spouse may also be achieved by way of a prescribed rate loan. A tax advisor can provide the best options available to you.
RRSP Contributions: Why wait until the last moment if you are planning to make Registered Retirement Savings Plan (RRSP) contributions for the 2021 year? Remember, you can contribute until 60 days after the calendar year to impact 2021 taxes.
RESP Contributions: If you have a Registered Education Savings Plan (RESP), consider making a contribution before year end. While this won’t impact your 2021 taxes, you may benefit from the Canada Education Savings Grant for 2021.
Charitable Donations: Make eligible charitable donations before December 31st to benefit your 2021 taxes. Remember that gifting publicly-traded securities with accrued capital gains to a registered charity not only entitles you to a tax receipt for its fair market value, but also eliminates the associated capital gains tax.
RRSP Conversion: If you turned 71 this year, make sure to collapse your RRSP. Consider making a final RRSP contribution, as this must be done by year end, not the usual March 1, 2022 deadline.
Many of these actions require planning, so don’t wait until it’s too late. For further assistance, please contact us and, as always, seek advice from a tax professional.
This article was originally published in the newsletter, "Challenging the Trend." Click here to view.
The views expressed are those of Wes Ashton, Director of Growth Strategy and Portfolio Manager, and not necessarily those of Harbourfront Wealth Management Inc., a member of the Canadian Investor Protection Fund.