Beat the Tax with These Year-end Tips
I had an opportunity to speak with Bill Baynton of the Investor’s Group to get some basic year-end tax advice. This is what he had to say.
Tax-planning should be a year round activity but even if you’ve been otherwise occupied this year; you still have time to save money on your 2009 taxes by using strategies like these.
Be deadline savvy. File your tax return and make tax payments on time to avoid penalties and interest. Payments that qualify for tax credits and deductions should be made by December 31.
Deduct to save. Take full advantage of all tax deductions including the most important – your Registered Retirement Savings Plan (RRSP) deduction. Be sure to fill up all your RRSP contribution room.
Give yourself all the credit. Make full use of tax credits to reduce your tax bill by:
– Pooling medical expenses on the tax return of the lower earning spouse.
– Pooling charitable donations or carrying them forward for up to five years to surpass the $200 threshold that increases your credit.
– Using the spousal credit for the higher-earning spouse.
– Transferring the age, disability, tuition and/or education credits to a spouse or supporting relative when not used by a dependent.
– Don’t forget the first time homebuyer, home renovations and moving expenses credits.
Split to save. Income-split by sharing pension income with a spouse, through a spousal RRSP or by paying a salary to (eligible) family members.
Be RRSP savvy. If you are turning 71 this year, you must wind up your RRSP and need to decide whether to take the cash (poor choice) or transfer the funds to investments held within a Registered Retirement Income Fund (RRIF) or annuity (much better choices). If you have earned income, you can continue making contributions to a spousal plan until your spouse reaches age 71.
Save tax-free. Make up to a $5,000 contribution to a Tax-Free Savings Account (TFSA). The contribution isn’t tax deductible but money and interest inside your TFSA is tax-free and so are withdrawals that you can make at any time for any purpose. Amounts withdrawn are added to your TFSA contribution room for the following year.
Make down investments pay off Plan to sell money-losing investments by the December 31 settlement date, which creates capital losses than can offset capital gains.
Buy now to save. If you’re self-employed, and claiming the capital cost allowance (CCA) on depreciable assets, buy them before year end to speed up tax write-offs.
Move to save. If you’re moving to a province with a lower tax rate do it before December 31 and you’ll pay the lower rate for the full year. If you’re moving to a province with a higher tax rate, try to delay until 2017.
And here’s the best tax-saving tip of all: Talk to your advisor before year-end to be certain you make the most of the other tax-reduction strategies available to you.
Mark Borkowski is president of Mercantile Mergers & Acquisitions Corp. Mercantile is a mid- market mergers & acquisitions brokerage. Contact him at www.mercantilemergersacquisitions.com