The original article can be read on Canadian Newswire
With the year coming to a close, it’s time to think about financial deadlines. Don’t make the common mistake of waiting until April to review your taxes! Consider these five tax strategies for year-end (aka, now).
Canadians who want to take full advantage of various 2013 tax planning opportunities need to act before year end instead of next April if they want to take advantage of year-end tax strategies specifically designed to reduce their 2013 taxes. These strategies are easy to implement, but they need to implemented before year end.
The article references a report by Jamie Golombeck, 2013 Year End Tax Tips, and offers sage advice for getting your financial ducks in a row. Among other tips, consider these five…
Consider Tax-Loss Selling
“Tax-loss selling involves selling investments with accrued losses at year-end to offset capital gains realized elsewhere in your portfolio. Any capital losses that can’t be used currently can either be carried back three years or carried forward indefinitely to offset capital gains in other years. In order for your loss to be immediately available for 2013 (or one of the prior three years), the settlement must take place in 2013, which means the trade date must be no later than December 24, 2013.”
Prepare For Retirement
If you turn 71 this year,this is your last change to make contributions to your RRSP before converting it to an RRIF or annuity. Under the right circumstances, it may be beneficial to over-contribute and pay the 1% penalty. Seek advice from your financial planner about this.
You can defer your OAS up to 60 months, meaning that future payments will increase 0.6%/month that you delay receiving it. This means that it could potentially end up as high as 36% more by the time you reach age 70. This decision involves some thought so again, you may want to seek financial advice here.
Plan For Withdrawals From Registered Plans
Withdrawing TFSA funds by the end of this year will allow you to re-contribute to them again in 2014, rather than having waiting until 2015.
Conversely, withdrawing RRSP funds to use for the Home Buyer’s Plan (1st time buyers) or Lifelong Learning Plan (post-secondary) should be done early in 2014 (instead of the end of this year) in order to take advantage of a 1-year hiatus for re-paying the withdrawal amount. Otherwise, you will be required to pay it back in 2014.
If an RESP beneficiary is a current student with little income, consider paying Educational Assistance Payments (EAPs) in December 2013. If the student has sufficient tax credits, the EAPs can be received tax-free.
Donate To Your Favorite Charity
If you procrastinate with your charity-giving, you can often contribute online up until December 31, with the benefit of an instant email tax receipt (dated accordingly).
Also, if you’re a first-time giver, you receive an additional 25% tax credit on your total donations made after March 30, 2013.
There are also provincial credits that you can tap into for additional tax savings.
Pay Expenses By Year-End To Be Eligible For Tax Deductions And Credits
You must pay/claim expenses (eg. daycare fees, student loan interest, support payments) by year-end to realize their tax savings for 2013.
- Consider taking dividends
- Plan for upcoming personal tax rate increases in BC and New Brunswick
- Use a prescribed rate loan for income-splitting
- Review asset allocation
- Contribute to an RESP or RDSP
To learn more about these strategies, read the original report, 2013 Year-End Tax Tips.
At the end of the day, know that there are specific things you can do to minimize any potential tax hit… but only if you know about them.
Speak to your financial advisor well BEFORE tax season to learn more about the potential for reducing your taxes. If you don’t have a financial advisor, re-evaluate why you don’t use one and seriously consider seeking out a professional, knowledgeable advisor.
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