Year-End Tax Planning: Benefit From Your Losses & Gains

If you are thinking of making portfolio adjustments, there may be a way to gain from your losses — or further benefit from your gains:

Gain From Your Losses Through Tax-Loss Harvesting — Using losses to offset capital gains may be an opportunity from a tax perspective. In general, when you sell an investment in a non-registered account, you must calculate the resulting capital gain or loss, based on the difference between the proceeds from the sale and the investment’s adjusted cost base. For tax purposes, only a prescribed portion of a capital gain is included in taxable income (the “inclusion rate,” currently 50 percent), while the corresponding portion of capital losses is generally deductible against taxable capital gains.

Benefit From Your Gains: Donating Securities In Kind — Donating publicly-traded securities “in kind” that have appreciated in value may eliminate tax on the resulting capital gain and allow for a donation tax credit for the fair market value of the securities. Do not sell securities and donate the proceeds, as part of the tax benefit will be lost. If securities have declined, simply sell them to claim the capital loss and donate cash to entitle you to a donation tax credit. If you’re subject to the alternative minimum tax (AMT), there may be tax implications. Remember to make charitable donations well in advance of the December 31, 2026, deadline to count towards your 2026 taxes.

Here are a handful of other year-end tax-planning ideas:

• Split income. This may include electing to split eligible pension income with a spouse or paying reasonable salaries to family members for services provided to your self-employed business.

• Contribute to your RRSP. You still have 60 days after the calendar year-end to make contributions for the 2026 tax year, but the earlier you contribute, the greater the opportunity for tax-deferred growth.

• Plan for the pension income tax credit. If you’re 65 or older and don’t have eligible pension income, consider opening a small Registered Retirement Income Fund (RRIF) or purchasing an annuity.

• Consider Tax-Free Savings Account (TFSA) withdrawal timing. If you plan to withdraw, consider doing so before year-end. Contribution room resets at the start of the calendar year, so withdrawals made after December 31, 2026, won’t restore contribution room until January 1, 2028.

For more information or ideas, please contact the office.

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