In this newsletter, we provide you with a summary of key strategies to consider before December 31, 2024.
1. Tax Loss Selling If you have securities with unrealized losses, think about selling them to realize those losses, especially if you've had capital gains during the year. This strategy, known as tax loss selling, can help reduce your tax liability. Just be sure to account for all transaction costs before triggering the loss.
2. Superficial Loss Rule If you plan to sell an investment to trigger a loss and repurchase the security, be aware of superficial loss rules that may affect your ability to claim a capital loss. Avoid repurchasing the same shares within 30 calendar days before or after the disposal.
3. Carrying Forward and Back Capital Losses Remember, capital losses can be applied against capital gains in the current year, and any remaining losses can be carried back up to three years or carried forward indefinitely, potentially resulting in tax refunds.
4. Year-End Bonus Planning Receiving a year-end bonus can impact your RSP contributions for the following year, which may allow for greater employee/employer pension contributions. You can also transfer the bonus into your RSP to avoid withholding taxes, provided you have adequate unused contribution room.
5. Charitable Donations Contributing to registered charities can reduce your personal tax burden. The deadline to claim a donation tax receipt for the current year is December 31, 2024. Consider donating publicly listed securities in-kind without being subject to tax on the realized capital gain. You will receive a donation tax receipt equal to the fair market value of the securities at the time of donation.
6. TFSA Contributions If you haven't already, make your TFSA contribution for 2024 (up to $7,000) and catch up on any unused contribution room. The lifetime TFSA contribution limit is $95,000. If you’re considering making a withdrawal, do so before December 31. This will allow you to recontribute as early as January 1, 2025.
7. RRSP Contributions You have until March 3, 2025, to make an RRSP or spousal RRSP contribution and deduct it on your 2025 tax return.
8. RRSP Contributions at Age 71 An RRSP must be converted to a RRIF (Registered Retirement Income Fund) by December 31st in the year you turn age 71. If you're turning age 71 this year and have earned income, consider making one last RRSP contribution before December 31. Otherwise, this RRSP contribution room is likely to be lost, unless you have a spouse who is under the age of 71.
9. Tax Shelters Consider purchasing tax shelters like limited partnership units or flow-through shares before year-end to claim tax deductions.
10. Interest on Family Loans If you set up a spouse or family trust with a prescribed rate loan, ensure that the interest owed is paid by January 30, 2025. The borrower may be able to claim a deduction for the interest paid on their tax return and the lender will have an income inclusion on their tax return.
11. Year-End Expenses Pay any eligible expenses that can be deducted or claimed as credits on your personal income tax return by December 31, 2024. These may include investment management fees, tuition fees deductible accounting and legal fees, childcare expenses alimony, medical expenses, and any business expenses.
Taking advantage of these strategies can help you optimize your tax situation and potentially save money as the year ends. If you have any questions or need assistance with your year-end financial planning, please don't hesitate to reach out to our team.
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