I can’t believe it’s already November, before we know it, we will be decorating the Christmas Tree!

Before we get full swing into the holiday season, take some time, and review your personal finances. Here are some time-sensitive tips that you may need to act on before the end of the year.

Tax Loss Selling Considering the markets this year, it might be beneficial to look at your non-registered portfolio statement for any holdings that are worth less than what you paid for them. For investors sitting is a loss position, Tax Loss Selling is a popular strategy at this time of year. The investor would simply sell any investments that have dropped below what they paid for them; this will trigger a capital loss.  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 indefinitely to reduce capital gains in the future.

Deductions It’s also time to pay certain expenses to ensure you get the deduction for the 2022 tax year. These include investment related expenses such as interest on money borrowed to invest, or investment counselling fees that are deductible for non-registered account.

RRSP-RRIF If you turned 71 in 2022, this is the last year to make an RRSP contribution before converting the account to a RIFF or annuity.

Income Deferral If you are expecting a year-end bonus, your employer may agree to postpone the actual payment of the bonus to 2023.  This means that the bonus income will be taxed in the 2023 tax year.  However, by lowering the income in 2022, the amount of RRSP/DPSP/Registered Pension contribution room may also be lowered for 2023.

RESP To receive the Canada Education Savings Grant (CESG) for 2022, contributions must be made to the plan by December 31, 2022.

TFSA 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 of the following year.  If you have therefore made withdrawals in 2022 and want to take advantage of the increased contribution room, you should wait until 2023 or you may face over-contribution penalties.

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 tax saving strategies.

Have a Great Week!

Tracey

Source: Jamie Golombek, Managing Director, Tax & Estate Planning CIBC Private Wealth, Doug Carrol VP Tax and Estate planning, Invesco, Dynamic Funds, 2019, MT 11-26-19, MT 11-04-22

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