Year-end opportunities to save tax
It's the holiday season and we know you have a lot on your to-do list. But don't wait till RRSP and tax season to start thinking about how to reduce your tax bill for 2009. Some strategies require that you act by Dec. 31. Consider these:
Use up capital losses. If you're selling investments this year and have capital losses, you can apply them to capital gains realized in 2009 to save tax. Any leftover losses can be used to offset capital gains and related tax of the past three calendar years (2006, 2007 and 2008). Be sure to do your trades well before year-end to ensure they're completed this year.
Push capital gains to the New Year. What if you plan to sell investments with capital gains but don't have spare capital losses? Again, you can reduce tax by waiting until January. A few extra days or weeks can mean deferring tax for another whole year. One exception: if you expect to be a higher tax bracket next year, selling this year may be the better choice.
Hold off on buying fixed-term investments. Are you planning to buy GICs or other investments with a term of one year or longer? You could postpone tax by putting it off until January. That's because interest is calculated and taxed each year on the anniversary date of the investment.
Do your giving now. When it comes to political and charitable donations, the tax man is uncharacteristically generous with tax credits. You can earn a credit of up to 75% for political donations to certain limits, and close to 50% on charitable donations above $200. But you must do your giving before Dec. 31 to see the benefits in your upcoming tax bill.
Choose an RRSP maturity option if you turn 71 in 2009. If you were born in 1938, you need to convert your RRSPs to a RRIF or annuity by Dec. 31 so the full value won't be taxed as regular income in 2010. If you have available RRSP contribution room, it may make sense to make one final contribution (or to contribute to a spousal RRSP if your spouse was born after 1938).
To discuss any of these opportunities, please call our office to set up an appointment. We want to help you make the best of the rest of 2009.
Use up capital losses. If you're selling investments this year and have capital losses, you can apply them to capital gains realized in 2009 to save tax. Any leftover losses can be used to offset capital gains and related tax of the past three calendar years (2006, 2007 and 2008). Be sure to do your trades well before year-end to ensure they're completed this year.
Push capital gains to the New Year. What if you plan to sell investments with capital gains but don't have spare capital losses? Again, you can reduce tax by waiting until January. A few extra days or weeks can mean deferring tax for another whole year. One exception: if you expect to be a higher tax bracket next year, selling this year may be the better choice.
Hold off on buying fixed-term investments. Are you planning to buy GICs or other investments with a term of one year or longer? You could postpone tax by putting it off until January. That's because interest is calculated and taxed each year on the anniversary date of the investment.
Do your giving now. When it comes to political and charitable donations, the tax man is uncharacteristically generous with tax credits. You can earn a credit of up to 75% for political donations to certain limits, and close to 50% on charitable donations above $200. But you must do your giving before Dec. 31 to see the benefits in your upcoming tax bill.
Choose an RRSP maturity option if you turn 71 in 2009. If you were born in 1938, you need to convert your RRSPs to a RRIF or annuity by Dec. 31 so the full value won't be taxed as regular income in 2010. If you have available RRSP contribution room, it may make sense to make one final contribution (or to contribute to a spousal RRSP if your spouse was born after 1938).
To discuss any of these opportunities, please call our office to set up an appointment. We want to help you make the best of the rest of 2009.
Print
Email a friend
Questions