Updated December 2018
Marie-Christine Daignault | Desjardins Group
This time of year is hectic. At work and at home, we're all busier than ever. But why not take advantage of this energy to take another look at your taxes and make sure you have effective strategies in place?
Angela Iermieri, a financial planner with Desjardins Group, has some ideas to help you do that by the end of the year.
1. Make a donation
Donating to a registered charitable organization entitles you to a tax credit. You get a 35% tax credit (federal and Quebec combined) on the first $200 of donations, and 53% on any additional amount.1,2
Couples can combine their donations on a single tax return to maximize their credit. Unclaimed donations can be carried forward up to five years.
You can also donate publicly traded securities that have appreciated in value to a charitable organization. You get a charitable tax credit and the capital gain is eliminated.
Why now? You'll be helping someone in need and you'll enjoy tax advantages! Find out more.
2. Contribute to a spousal RRSP
You can contribute to a spousal RRSP as long as your spouse hasn't turned 71. You'll keep enjoying the resulting tax deductions--provided you still have contribution room--and you can take advantage of income splitting at retirement.
Why now? Contributing just before December 31 of each year makes it easier to respect the 3-year rule, so that the income will be taxed in your spouse's hands and not yours.
3. Convert your RRSP to a RRIF if you are 71
If you turn 71 in 2018, your last RRSP contribution must be made before December 31, 2018, but you can claim the tax deduction in future years.
Why now? This is the deadline for transferring your RRSPs to a RRIF based on your age. Your financial representative can help you with this and let you know the minimum amount you need to withdraw from your RRIF starting in the new year.
4. Contribute to an RESP
A Registered Education Savings Plan (RESP) is a gift--for you, your child and the future. Contributing to an RESP doesn't give tax savings, but the federal government tops up your contribution by 30% (20% in Ontario). That's the amount of the grant that can be paid to children up to and including the year the beneficiary turns 17.
Why now? In order for a child to receive grants up to age 17, the RESP must be opened by December 31 of the year in which the child turned 15. The contributions must total at least $2,000 or contributions of at least $100 a year must be made in any 4 previous years.
5. Sell investments with unrealized losses
Capital losses reduce the amount of capital gains. They can be carried back for the previous 3 years and carried forward indefinitely. If you've had capital gains this year, you can deduct your losses against your gains and reduce your taxes.
Why now? If some of your investments triggered a capital gain during the year, reviewing your portfolio before the end of the year will help you determine if selling investments with unrealized losses is right for you. Ask your financial representative for advice.
1 For Ontario: 20.05% on the first $200 and 40.16% on the remainder.
2 Residents of Quebec must take into account the 16% federal abatement to find the actual credit amount.