With winter on its way, it may seem too early to be thinking and planning for spring, but December is a critical month when it comes to smart financial planning. With year-end just around the corner, there are many opportunities to take advantage of now that will pay off next spring at tax time.
If you are interested in exploring this topic further, give us a call and we’ll help you manage your personal and business financial affairs.
Determining Which Tax Tips Apply To You:
Begin by reviewing your income, expenses and potential deductions. Before you can make any adjustments you will need to look closely at how much you are earning, spending, and saving, and what you can deduct.
Next, review your portfolio; if capital gains are high, consider taking a loss to offset some of the capital gains income.
You may also want to look at deferring some of your income. Unless you have reason to believe the next year will bring you a higher income and move you into a higher personal income tax bracket, you may want to defer income until after the first of the year. If you are self-employed, for example, send the last invoices out late in December so you will more likely receive payment in January.
Ten Tax Tips To Help You Save:
1. Tax Loss Selling: If you have taxable capital gains for 2008 in your non-registered account, you may want to sell some of you losing stocks. Why? The realized losses will offset your gains, thus reducing your taxable amount.
Capital Losses can be carried back against Capital Gains accrued in the previous 3 years and carried forward indefinitely. Make sure you do this prior to December 24th though as it takes approximately three days to sell your trade.
The last day for settling trades on Canadian stock exchanges is December 24 and for U.S. exchanges it is December 26. Conversely, consider holding off selling any securities with accrued capital gains until after the New Year.
2. Be Patient When Taking Stock Profits: If you want to take profits in a stock, wait until the New Year – this way you will have a year of tax deferral.
3. Charitable Donations: You have until December 31, to make your charitable donations in order for it to count under the 2008 tax year. Also, when you file your taxes next year, make sure you file all the donations under one person.
4. Donate Stock Instead Of Cash To Charities: It may be a bit late for this now because of processing time, but if you donate stock to a charity instead of cash you’ll get tax bonuses. The tax regulations now state that stock donated to a charity will not face any capital gains taxes AND the contributor will receive a tax receipt for the amount donated.
5. Pay your January 1st Mortgage Payment on or Before December 31st: This allows you to take an additional deduction for interest paid.
6. Be careful about buying an actively managed mutual fund: The later it gets in the year, the more likely you will pick up the capital gains distributions on a mutual fund you hardly own. Check the distribution schedule and if it’s late in the year, wait before buying the fund.
7. If you’re self-employed, stock up: This is the time to buy all of the business equipment and supplies you haven’t yet purchased. Make sure to mark and save your receipts.
8. RESP Contributions: If you plan to make any Registered Education Savings Plan contributions, do so by December 31. The annual contribution limit is $4,000 per child. Likewise, pay all child-care expenses by year-end. The annual deduction limits are $7,000 for children under age seven and $4,000 for ages 7-16.
9. RIFs: If you or your parents are turning age 69 this year, you have until December 31 to convert your RRSP to a RRIF. If you planned to make one last contribution, do it by December 31 rather than the usual March 1 deadline. Your tax bracket may increase, so make sure you talk to a qualified financial professional about how you can structure your retirement finances to preserve wealth and minimize taxes.
10. RRSP Contributions: Don’t wait until the March 1 RRSP deadline to review your annual investments. Do this in December so you have time to take advantage of tax-smart investing strategies before the year-end deadline for income tax purposes.
Contact Your MBN Mortgage Specialist and we can help point in you in the right direction to get the correct and best advice on how to save when it comes to tax time. Reach us at 1.866.955.9662 or www.mbnmortgage.com.
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