Final Months of the Year
Year-End Reminders: Save Tax!
Is it too early to think about the year end? If you are considering tax-planning strategies, not at all. In fact, now may be a good time to take steps to minimize your 2017 taxes. Tax planning continues to be an important part of investing, especially as the government has raised taxes on higher-income earners over recent years. Here are a few considerations:
If you are 65 years old…
You are eligible for the pension income tax credit. This allows a taxpayer to claim a non-refundable tax credit on up to $2,000 of eligible pension income. If you don’t have any pension income, generate some for yourself. Move a small portion of your Registered Retirement Savings Plan (RSP) assets into a Registered Retirement Income Fund (RIF). You can then withdraw $2,000 each year until you convert your RSP and start drawing “regular” income. This may be a great way to effectively withdraw RSP funds on a tax-efficient basis.
If you are 71 years old…
Convert your RSP before year end. You have several options, including converting to a RIF or annuity or taking all or a portion in cash (subject to taxes at your marginal tax rate). We can help with the decision. However, the process of transferring accounts can take time, so don’t leave the decision until the last minute. Also, consider making a final RSP contribution. Note that this must be done by December 31, 2017, instead of March 1, 2018.
At any age…
Consider maximizing your charitable donations, especially if you haven’t claimed them on your previous tax returns. Remember, this is the last year of the First-Time Donor’s Super Tax Credit (FDSC), which provides an additional 25 percent credit
for first-time donors on up to $1,000 of donations. The FDSC is generally available to an individual if neither (s)he nor his/her spouse/common-law partner has claimed and been allowed a charitable donation tax credit for any year after 2007. Eligible donations must be made by year-end.
Make Registered Education Savings Plan contributions. While contributions are not tax-deductible, the end of year deadline may be important to take advantage of the Canada Education Savings Grants, which can then be invested on a taxdeferred basis.
Make RSP contributions for the 2017 year. You still have until 60 days after the end of the calendar year to make a contribution to save on 2017 taxes.
Use capital losses to offset capital gains. Before year-end, you may be considering the sale of certain non-registered investments which are in a loss position. Keep in mind that realizing such losses may provide potential tax benefits, where they can be used to offset taxable capital gains. Care must be taken when doing this, and the assistance of a professional may be beneficial.