Year End Tax Planning

Dec 06, 2017 | Rachel Hammell


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It is not about how much you make - it is about how much you keep.

2017 Year End Tax Planning

 

As year-end approaches taking time to review your financial affairs may yield significant tax savings. It is not about how much you make - it is about how much you keep. To ensure you leave no stone un-turned, we have summarized some common year-end tax planning strategies.

 

Tax loss selling

If you have sold some assets and realized capital gains during the year, and you are holding other securities with unrealized losses, consider selling them as well. This strategy of selling securities at a loss to offset other capital gains realized during the year is a year-end tax planning technique commonly known as tax loss selling. Review your portfolio with your RBC advisor to determine if any investments are in a loss position and no longer meet your investment objectives.

 

Charitable donations

Making a charitable donation is one way you can significantly reduce the personal tax you pay. The final day to make contributions to a registered charity in order to claim the donation tax receipt on your 2017 income tax return is December 31, 2017. Due to the calculation of the donation tax credit, donations above $200, can result in a tax credit of about 50% depending on your province and income level.

 

RRSP contributions

You have until March 1, 2018 to make a contribution to your RRSP, or a spousal RRSP, in order to be able to deduct the amount on your 2017 tax return. By contributing to your RRSP before December 31, 2017, you benefit from two extra months of compounding tax-free growth which may increase your savings for retirement.

 

TFSA contributions

If you have not yet done so, you can now make your Tax-Free Savings Account (TFSA) contribution for 2017 (up to $5,500) and catch up on any unused contribution room from 2009-2016. The TFSA enables you to earn tax-free investment income, including interest, capital gains and dividends, which may result in greater growth compared to a regular taxable account. The total amount you could shelter in a TFSA if you have never contributed is $52,000.

 

For investors interested in managing their tax burden, Tax Planning Basics offers an overview of Canada’s tax rules and how these rules can influence your investment decisions. Information in this easy-to-read series includes ideas to keep your taxes as low as possible:

  • What types of investment income are taxed lower than others

  • Why you should generally hold Canadian dividend-paying investment outside your registered plans – and interest-bearing investments within your registered plans

  • 10 ways to reduce taxes by legally transferring taxable income to lower-income family members

  • How in-trust accounts compare to Registered Education Savings Plans for tax-effectively putting aside funds for your children’s or grandchildren’s post-secondary education

  • How to minimize exposure to U.S. Estate Tax if you own U.S. assets like real estate or stocks

Click here to request your copy of the Tax Planning Basics articles.

 

This article is for information purposes only. Please consult with a professional advisor before taking any action based on information in this article. Elizabeth can be reached at 705-444-4742 or by email at Elizabeth.degroot@rbc.com

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Tax