Your essential year-end tax planning checklist |
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Even though you may only have to file your tax return in April, a number of tax-planning opportunities require your action before the end of the year. Review the following to see how this might apply to you. Make charitable donations. If you want to make a donation to a registered charity or foundation, consider donating mutual funds or other securities that have increased in value since you bought them. Since February 2008, the federal government has extended the capital gains tax exemption to donations of exchangeable shares and partnership interests as well, to save you the capital gains tax when you donate these investments in kind. Make timely financial transactions. Ensure that you qualify for longstanding and newly introduced tax breaks. Most tax credits and deductions require that you complete financial transactions by year-end. These include charitable and political donations, medical expenses, child support payments, alimony, eligible accounting and legal fees, professional fees, and union dues. Consider tax-loss selling. If you have investments outside a registered plan that have gone down in value and you don’t expect them to recover, you may want to consider selling them. This will generate a capital loss that can be used to reduce taxable capital gains. Realized capital losses must be applied first against capital gains realized during the same year, but any excess can be carried back to reduce gains realized in the previous three years, or carried forward indefinitely for future use. Contribute to an RESP. Make an annual Registered Education Savings Plan (RESP) contribution before December 31 to qualify for the government-sponsored Canada Education Savings Grant (CESG). Convert your RSP. If you turn 71 this year, you face a very important deadline. Tax laws require that you terminate your RSP and transfer the investments into an income-producing option such as a Retirement Income Fund (RIF). Financial institutions need your instructions well before year-end in order to complete the conversion by December 31. Article Disclaimer The statements contained herein are based on material believed to be reliable, but are not guaranteed to be accurate or complete. The articles do not provide individual financial, legal, tax, insurance or investment advice and are for information purposes only. Graphs and charts, if used, are for illustrative purposes only and do not reflect future values or future performance of any investment. Particular investment strategies should be evaluated relative to each individual's objectives and risk tolerance. Each insurance policy or contract has different provisions on coverages, benefits, exclusions and limitations. Any policy should be carefully reviewed to determine the rights and obligations of the owner and insured persons. The insurance strategy described is not appropriate for all people. Particular insurance strategies should be evaluated relative to individual objectives and in consultation with a life licensed insurance advisor. The Toronto-Dominion Bank and its affiliates and related entities are not liable for any errors or omissions in the information or for any loss or damage suffered. |
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