5 Year End Tax Saving Tips

As we get closer to the end of the year and holiday time with friends & family, we wanted to

ensure you are aware of some strategies you can take advantage of in the next month. It’s worth the short read, especially as we can help you Save Tax and qualify for Government Grants and Tax Credits along the way! While these are the most common strategies available, there are more. We would encourage you to discuss your situation with us to see how we can help you personally.

  1. You are in Retirement: Lower your tax rate on Pension Income

  • Consider taking extra income from your RRIF before year end depending on your income level

  • If you are over 65, you are eligible to split up to 50% of Pension Income with your spouse.

  • You would also qualify for the Pension Income Tax Credit – a double benefit!

  1. You are approaching Retirement: Save Tax Now, Pay Less Tax in the Future

  • Consider making a Spousal RSP Contribution by December 31, 2019

  • If one spouse is in a higher income tax bracket, this strategy is a valuable income splitting opportunity for you as a couple

  • The lower income spouse can safely withdraw the funds from the spousal plan to be taxed at the lower level as early as January 1, 2022.

  • By waiting until the usual RSP deadline of March 1, 2020 the funds would not be eligible to be withdrawn at the lower spouse tax rate until January 1, 2023.

  1. You have investments that are down from where you purchased them: Recover Capital Gains Tax back for any of the previous three years!

  • Consider realizing your losses to offset capital gains tax on other investments:

  • This is something we do for our Discretionary Accounts every year.

  • It is very important that we are aware of any of your gains and losses for investments you have in other accounts.

  • By CRA rules, investments that are sold must not be purchased for the next 30 days for the gains or losses to be realized.

  • You are able to use capital losses to offset tax you will pay this year or have already paid in any of the three previous years. We can review your tax returns to see if this applies to you.

  1. You are saving for someone’s education: Get free money from the Government

  • Consider topping up your Education Savings Plan (RESP) to maximize the 20% Grant by the Government

  • The maximum grant is $1000 per year per child, per calendar year

  • Even though contribution room accumulates each year, there is a maximum contribution of $5,000 that is eligible for the Government Grant

  • All Growth is Tax Free until it is withdrawn

  1. You own your own Business: Revisit how your “Passive Income” may be affecting your overall taxes

  • “Passive Income” is essentially the income you earn on investments (Stocks, Bonds, Mutual Funds, GIC’s) inside your company investment account.

  • If your Passive Income is above $50,000, you may be affecting how your actual business income is being taxed.

  • There are multiple ways to address this situation if you are being affected.

We would be happy to answer any questions that you may have on these or any other tax related matters.

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