Have you undertaken tax planning for your business or organization? Did you talk to a professional to maximize tax savings? Most company owners are on top of their tax situation but less often think of strategies for their individual tax claims. Planning is crucial for navigating investments, charitable contributions, and other deductions that optimize personal tax outcomes. The following are suggestions for optimizing year-end tax benefits for individuals.
Strategies For Investors
If you invest private funds, the following tips will assist you in optimizing your individual year-end tax benefits.
- Trade before the investment deadline: If you are selling an investment (stock, ETF, mutual fund, etc.) at a loss (to offset capital gains), ensure you do so at least two business days before the end of the year.
- Trigger accrued losses: If you have funds/securities that have lost value, sell them to trigger capital losses before the year-end, offsetting capital gains for the current year.
- Minimize capital gains tax using unused capital losses to offset capital gains. Consider an ITF account for a family member with little/no income and structure asset sales to receive proceeds over more than one tax year.
- Contribute to a TFSA (tax-free savings account), allowing tax-free growth and freedom of withdrawal times.
- Contribute to an RDSP (registered disability savings plan) for yourself or a family member. You may qualify for a matching government contribution.
RRSP Strategies
Last year’s notice of reassessment/assessment shows your RRSP contribution limit.
- Take advantage of unused RRSP contribution room, maximizing your RRSP to maximize benefits. Consider withdrawing monies from a TFSA or taking out a loan to make your contribution.
- Contribute to your spouse’s RRSP: Minimize the effects of attribution rules on withdrawals by contributing to your spouse’s RRSP before year-end.
- Make home buyers plan withdrawals after year-end: Delaying a withdrawal allows time before repayment with RRSP funds begins.
- Make Home Buyer’s Plan required repayment (found on your notice of assessment) and designate it on your personal return, avoiding unnecessary income inclusion.
Family Strategies
Take advantage of the many family tax strategies available.
- Set up a loan (prescribed rate) with your common-law partner/spouse.
- Swap assets with a family member(s) or transfer assets to a minor child.
- Apply for Canada Pension Plan pension sharing.
- Purchase RESPs for your children.
- Take advantage of the federal tuition non-refundable tax credit.
- Explore the Canada Caregiver Credit.
- Pay tax-deductible childcare expenses to adult children.
- Review trust income, determining how much income to flow to beneficiaries.
Optimizing year-end tax benefits for individuals can be convoluted and confusing! Talk to a professional tax planner for advice and assistance. They’ll provide guidance and tax planning support.
Need help navigating investments, charitable contributions, and other deductions to optimize your individual tax outcomes? Contact Cook and Company Professional Accountants for tax planning and advisory.
