Tax Tips as We Near the Year’s End

Clients and friends,

There’s still time for tax-efficient planning before we reach the year’s end. Here are some helpful tips from a recent AdvisorToGo podcast we tuned into:

  1. Be sure to pay certain expenses before year’s end. Expenses related to investments (i.e. interest on money owed) are deductible for Non-Registered accounts if paid before Dec. 31st.
  2. Consider tax versus income deferral. Evaluate your tax rates for both money in the corporation and your income. Determine whether you’d prefer to enjoy tax deferrals or leave the money in the business and whether you’d prefer to take salary or to defer income.
  3. Rebalance your portfolio sooner than later. Those who have invested in equity markets have seen massive gains in their portfolio as of late. Rebalancing allows you to take those gains and reallocate them with your investment policy statement.
  4. Think about year-end loss selling. Rebalancing will also help to realize potential losses and you might want to offset those against your capital gains.
  5. Discuss year-end donation planning. In the season of giving, donating portfolio wins to a registered charity or worthy cause not only can support those in need, but it can also reduce your income tax expense. Alternatively, setting up a donor-advised fund allows for in-kind contribution, no capital gains tax on any accrued gains in your portfolio, and still provides a receipt for the fair market value on your donations.
  6. Review your RESP options. Revisit planning for contributions to Registered Education Savings Plans (RESPs) for your children.
  7. Consider your loan options. The prescribed spousal loans rate is fixed at 1% until the end of the year.
  8. Review your RRSP contributions. For business owners, total compensation is key and salary must be considered against dividends. Paying yourself enough in salary (at least $162,000) is vital to being able to make the maximum contribution ($29,210) to your Registered Retirement Savings Plan (RRSP) next year. Those who turned 71 this year seeking to convert their RRSPs into Registered Retirement Income Finds (RRIFs) or Annuities have until Dec. 31st to make any final contributions.

Just some things to consider before we head into the New Year. Ready when you are.

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