Year-end tax reminders and tips
To be sure you keep your tax bill as low as possible, tax and financial planning should be a year-round activity. But even now, as the time to file your 2016 tax return approaches, there are certain steps you can take to reduce your next tax hit.
Capital gains and losses Sell money-losing investments by the December 31 settlement date to offset capital gains. If you plan to repurchase the assets you sold at a loss, don’t fall afoul of the superficial loss rules which will remove any tax advantage if you repurchase an identical capital property within 30 days after having disposed of it.
RRSP contributions The contribution deadline for 2016 is March 1, 2017. RRSP contribution room can be carried forward indefinitely and you may want to consider deferring a deduction to a future year when you’ll be in a higher tax bracket.
RRSP withdrawals If you intend to withdraw cash from your investments held within an RRSP and expect your income to increase significantly next year, consider making the withdrawal before year end. If you turn 71 this year and are required to wind up your RRSPs before December 31, it’s tax-advantageous to transfer the funds to investments held within a Registered Retirement Income Fund (RRIF) or annuity. As long as you have RRSP contribution room you can also continue to make contributions for your spouse until he or she turns 71.
Income-splitting Save on taxes by contributing to investments held within a spousal RRSP, through a pension-income split with a spouse, or by paying a salary to other (eligible) family members.
Home Buyers’ Plan (HPB) By delaying a withdrawal from your investments held within an RRSP under HBP until after December 31, you’ll extend the time period for purchasing a new home and for the first repayment by an additional year.
Registered Education Savings Plan (RESP) If your child is turning 15 this year and you want to ensure he or she will be eligible for the Canadian Education Savings Grant* (CESG) in the years the child turns 16 and 17, by the end of the year you must be able to show that you contributed at least $2,000 to their investments held within an RESP (with zero withdrawals) or you contributed at least $100 for you child in any four year period (again, with zero withdrawals).
Tax-Free Savings Account (TFSA) Make a $5,500 contribution to your investments held with a TFSA. The contribution isn’t tax deductible but the money and interest earned inside your TFSA are tax-free and so are withdrawals, which can be made at any time for any purpose.
Tax Deductions and Tax Credit Take full advantage of all that are available to you and make sure the items you claim were paid in the year they are claimed.
These are just a few opportunities for year-end tax savings. Talk to your professional advisor to make sure you’re not missing out on others.
June 1, 2016
This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial Services Firm), and Investors Group Securities Inc. (in Québec, a firm in Financial Planning) presents general information only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant
*The Canada Education Savings Grant and Canada Learning Bond (CLB) are provided by the Government of Canada. CLB eligibility depends on family income levels. Some provinces make education savings grants available to their residents.