Christmas shopping is what’s on most people’s minds in December, but this is also the time of year to take advantage of tax savings before we put a bow on 2018 and kiss it goodbye.
I want to see you head into 2019 with savings in your pocket and actually looking forward to doing your taxes, instead of stressing about writing a cheque to the government. So, let’s unwrap six money-saving tax tips that you need to do by the end of the year:
- As your mom would say: It’s better to give than receive. And in the case of donations, anything you give above $200, you’ll get a 29% federal tax credit PLUS the applicable provincial tax credit. If things were a little tight this year, you can combine two or more years of donations on one tax return to qualify for the larger tax credit OR combine your donations with that of your spouse.
- Another way to support your favourite charity and reap a tax benefit is by donating a security ‘in-kind.’ This way you’ll get a donation receipt for the market value of the security when donated. It’s important to choose a security with a significant unrealized capital gain, since the capital gain normally connected with the disposition of the security will not be included in your income and not taxed.
- There is a Federal election coming next year, so this is the time to make that political donation and support your favourite candidate. You get a 75% credit on the first $400 that you give – you win, even if your candidate doesn’t.
- It was a rough ride on the stock markets in 2018, but you can make some of those losses pay off in the end. Are you holding investments that are trading at a level below what you paid for them? What you want to do is sell losing positions to offset any other capital gains this year. This is called tax loss selling. One key thing to note: after offsetting gains in 2018, these losses can be carried back for the past three tax years and offset gains taxed in those years. Keep in mind, any tax loss selling must be completed by December 27th, as the transaction has to settle this year. So instead of missing out on potential recovery in a weak sector, consider lateral switches to provide similar market exposure within an industry. As always, talk to your financial advisor before making any moves.
- If you’ve had a job loss or trouble finding employment, you may want to make a withdrawal from an RRSP or RRIF account. Because your income is lower than usual, the tax applied won’t sting as much. Being smart and strategic about withdrawing from these types of accounts can help manage the lifetime tax liability with these accounts.
- Here’s one last gift, and this one is from the Canada Revenue Agency – it’s one of the few tax shelters. Flow-through shares have created allowable deductions and the purchase of eligible ones must be made by year’s end. They can be bought as part of a fund or limited partnership or individually. There is significant investment risk, so it’s extremely important to talk over the risks with your advisor.
These are just a few of the money-saving tax tips that you can do to make sure you head into 2019 on good financial ground. It’s always a smart thing to do an assessment of your budget and investments in December to make sure that you stayed on track for the year and see what your shortfalls were and what needs to be changed. Don’t let the taxman benefit from your hard work.
Wishing you the best for holiday season and a fantastic financial future in 2019!
Ian Webster's nearly two decades of recognized experience at several well-known financial organizations has given him the inside track on the upsell of products such as mortgages and mutual funds and allowed him to help clients with everything from lowering their taxes to developing profitable investment portfolios. His expertise has been featured in The Globe and Mail, Toronto Star, Toronto Sun, and Time. He has also been a featured financial speaker at many high-profile networking functions.
Find Ian online at www.financialfighter.com and on Twitter, Facebook, LinkedIn, and Instagram.