We’re so close to the end of 2011 – you can almost hear the notes of Auld Sang Lyne. At Silver+Goren, we hope you can spend some time thinking about the well-being and happiness of loved ones, enjoy the holidays and get ready to welcome in the New Year.
But we wouldn’t be doing a very good job if we didn’t push you to spend a little attention on your own financial well-being. With a bit of time and planning, the end of the year can offer some interesting tax planning opportunities.
There are a number of tax issues you should consider before the end of 2011 that can minimize this year’s taxes. (And yes, we know that’s just a few days away.)
Start by doing something simple – review your investment portfolio. Give thought to selling any stocks you have at a loss, so you can reduce taxes payable on any taxable capital gains you may have earned earlier in the year. If you have capital losses carried forward from other years, think about triggering some gains so you can use them while harvesting some of your profits. But, always keep in mind that your investment strategy is paramount. That means – never do something just for tax purposes if it will harm your overall investment performance.
If you have tax-deductible or tax-creditable expenses to be paid early in 2012, it may be better to pay them now. This way you can get the benefit of tax deduction or tax credits in your 2011 return. Remember, you can get a 2011 tax credit if you enroll your children in arts programs.
The prescribed rate for this is still 1% for the last quarter of 2011. So, this may be a good time to make a low-interest loan to your spouse to help income splitting for future investment income.
Don’t forget to update your travel logs for the year. If you’re an employee using an employer-provided vehicle for work purposes, you can reduce standby fees and extra charges for operating costs. This lets you cut down on taxes payable – as long as you can appropriately separate and document personal and business vehicle use.
If you turn 71 in 2011, this is your last year to make an RRSP contribution. Remember the deadline for your final contribution is December 31, 2011, rather than February 29 as the normal rules allow. You also must choose your RRSP maturity option before the year end.
Next, look at your charitable donations. If you’re thinking about making any in the near future – do it before the end of the year. You’ll get a cash credit at the lowest tax rate on the first $200 donated. For anything over $200, you’ll get a tax credit based on the highest personal tax rate.
If you have securities in unregistered accounts where the value has appreciated significantly, you can donate them to charity and not pay tax on the accrued gain, while still receiving a receipt for the full donation amount. But it’s worth noting that in the 2011 budget, the rules about flow through shares changed. You’ll now only be exempt from capital gains on the transfer of these types of shares to the extent the gain exceeds the original investment cost.
If you’re politically inclined, you can donate to political parties and receive tax credits for donations up to a maximum of $2,821.
Don’t forget education. Remember to make RESP contributions before the end of the year. For contributions up to $2500, the federal government will contribute a Canada Education Savings Grant up to $500 to your child’s RESP.
Finally, think about your Tax-Free Savings Account. Consider depositing $5000 into your TFSA. If you’re opening one for the first time, you can contribute up to $15,000 before 2011 ends. While you don’t get any tax deductions for your deposit, any income earned in this plan is tax free.
It’s a long list – but focus on the items that apply to you. Your holiday shopping for loved ones is probably done. With a little attention to your year-end tax planning opportunities, you can give yourself a wonderful gift of tax savings.
Everyone at Silver + Goren wishes you a wonderful holiday and the very best for the New Year.