As the end of 2018 approaches, now is the perfect time to review your personal finances and figure out if there are any strategies you should be taking advantage of to help you save tax come April. Here are some tax tips you may want to consider:
Tax-Loss Selling for Non-Registered Accounts. A popular strategy at this time of year is to sell investments that have dropped in value and trigger capital losses. Capital losses can be used to offset capital gains. Any capital gains realized this year can be reduced or eliminated, thereby reducing payable taxes. If the capital losses triggered exceed this year’s capital gains, the excess amount can be taken back three years and used to reduce any capital gains realized in those years. As an alternative, the capital losses can be carried forward to reduce capital gains in the future. This year the deadline for capital loss selling is Dec. 27th as time is needed to settle the trade.
Tax-Free Savings Accounts (TFSAs) Withdrawals One of the advantages of the TFSA is that when withdrawals are made from the account, the ongoing contribution room will be increased by the amount of the withdrawal. It is very important to note, however, that the increased contribution room does not come into effect until January 1 the following year. Therefore, if you want to take money out of your TFSA, now is the time to do it. This is because any withdrawals made in 2018 will be added back to your contribution room January 1, 2019. If you have not previously invested in a TFSA the dollar limit for 2018 is $57,500, as of January 1 that amount will increase by $5500 to total $63,000.
RRSPs for those Turning 71. A taxpayer cannot hold an RRSP beyond the end of the year in which they turn 71. Therefore, if you have turned or are turning 71 before the end of the year, you must do something with your RRSPs by December 31. The two most common options are to establish a Registered Retirement Income Fund (RRIF) or to purchase an annuity.
RESP Contributions. To receive the Canada Education Savings Grant (CESG) for 2018, contributions must be made to the plan by December 31, 2018. The maximum CESG that can be obtained in a single year is $1000, for a lifetime total of $7200. If you have a child that turned 10 this year and is not currently a beneficiary of an RESP you should consider contributing by Dec. 31st, otherwise you will permanently lose the opportunity to receive the maximum $7200 CESGs.
Delay RRSP Withdrawals under Home Buyers (HBP) and Life Long Learning Plans (LLP). You are allowed to withdrawal funds tax free from your RRSP under the HBP (up to $25000 for first time buyers) and the LLP (up to $20,000 for post secondary education). With both plans you must re-invest the money back into your RRSP after a grace period. Therefore, if you are considering withdrawing funds under one of these plans, taking the money early 2019 can delay the repayment by one year, rather than taking it late 2018.
Deferring a Bonus or Retirement Package. If you are expecting a year-end bonus or receiving a retirement package, ask your employer to postpone the actual payment until January. This means that the additional income will be taxed in the 2019 tax year. However, by lowering the income in 2018, the amount of RRSP/DPSP/Registered Pension contribution room may also be lowered for 2019.
These tips highlight just a few of the ways you can act now to benefit from tax savings when you file your return. However, keep in mind tax planning should be a year round affair. Please don’t hesitate to contact me if you have any questions on these or other tax saving strategies.
Have a Great Weekend!
Tracey
Source: Dynamic Funds, Jamie Golombek, Managing Director, Tax & Estate Planning CIBC, Renaissance Investments, Doug Carrol VP Tax and Estate planning, Invesco, Investment Executive original article posted on welcometojamiegolombek.com by Jamie Golombek October 2017, 2018 year end tax tips by Jamie Golombek, November 2018
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