Prescribed rate loan to a spouse: If you’re married, consider establishing or modifying a spousal loan as a possible income-splitting strategy.
Unrealized capital gains: If you have unrealized capital gains and your marginal tax rate will be lower in the coming year, defer the gains until then. This way, any tax payments can be deferred until the next tax year.
Tax-loss harvesting: Has an asset sale, such as a rental property or securities that soared, set you up for a large capital gain in the current tax year? Consider selling some securities that are in the doldrums, on which you have an unrealized capital loss, to help reduce tax liability.
Charitable donations: Making a charitable donation reduces personal taxes each year. If you plan on donating securities in-kind before the year ends, start the process now. It’ll take some time to administer the donation.
Employer Bonuses: Are you receiving an employee bonus by December 31 of this year? If you expect to be in a lower tax bracket next year, defer it to reduce next year’s taxes.
Moving within Canada: If moving within Canada, be sure to take into account the differing provincial tax rates across the country and if relocating to a province with a lower tax rate, load up the moving van before year’s-end.
Quarterly payments to CRA: If you make quarterly tax installment payments to the CRA, you need to make final payments by December 15 of the current year to avoid late interest charges.
Fees: Pay all outstanding fees by the end of the year to ensure the count toward the current year’s tax return. This can include: investment management fees; tuition fees; safe deposit box fees; accounting and legal fees; childcare expenses; alimony; medical expenses; and any business expenses.
If you’re tax filing as a business owner:
Incorporated company: If you’re a business owner with an incorporated company, you can receive both year-end corporate income tax deductions and a structured retirement savings plan through an Individual Pension Plan.
Salaries for family members: Business owners should pay out salaries to family members before December 31. This strategy potentially provides earned income that enables them to make an RRSP contribution for the following year, as well as provide the business deductible payroll expenses.
Purchasing assets: If you plan to buy assets such as computers for your business, go shopping before the end of the year. This way, you can claim depreciation on the assets for tax purpose.
As with all things related to taxes and financial advice, sit down with a trusted local professional and discuss those options that you think may benefit you, so that you understand the pros and cons for your individual or business situation.
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