Santa’s on a tight schedule, he only has a few days left to make sure all the presents are wrapped, packed and his reindeer are ready to fly.
The end of the year is also a crucial time for last minute financial planning, even for Santa. Jolly old St. Nick is not only a Canadian; he is a prominent philanthropist, business owner, senior citizen, and extensive traveler. Like all Canadians he needs to take into account several taxation and financial planning considerations before the end of the year.
Here are a few tips:
Charitable donations. Santa is one of the world’s most prominent philanthropists. Fortunately for him, most of his donations will be made by the December 31st deadline so that credit can be made on his 2024 tax return.
Income Splitting. This is an important consideration as Mrs. Claus is not employed (as far as we know). Santa might want to consider income splitting with her to minimize his annual tax liability by using a prescribed rate loan to Mrs. Claus. Depending on the amount of the loan, the amount of tax paid by Santa could be substantially reduced. (Current rates for 2024 are between 4-5%).
Avoid the OAS Clawback. Once Santa’s 2024 income reaches $90,997 his OAS will start to be clawed back.
Santa does extensive travelling. Because of this, he will need out-of-country travel insurance and may also consider out-of-country medical insurance for his Christmas Eve flight, just in case.
If Santa has made investments, and he wants to offset any capital gains with capital losses, the last trading day to ensure losses can be used to offset gains from this year is December 27th, three business days before the end of the year.
Is Santa getting ready to RIFF? If Santa turned 71 in 2024, he would need to start drawing down his RRSP/RRIF next year. The minimum withdrawal amount will be 5.28% of the value of his account on January 1st.
Santa is an (incorporated) business owner with an eternity of active years ahead of him. As such, he should consider opening an Individual Pension Plan (IPP). An IPP is structured to provide tax relief for the corporation and enhanced retirement savings (beyond the RRSP).
Santa will want to take some time off and relax after December 25th. As a Snowbird heading south for the winter, he must remember if he stays in the U.S. for more than 182 days within a 12-month period, he may be liable to pay U.S. income tax.
So much to do, so little time. Let’s hope Santa has hired a Certified Financial Planner to help guide him through the nuances of Canada Revenue Agency’s Income tax act.
Wishing you all a Wonderful Christmas; filled with family and friends.
Tracey
Sources:
https://www.sunlife.ca/en/investments/rrif/withdrawals
Photo by Tim Mossholder on Unsplash
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