Year-End Tax Planning Tips & Deadlines

Hard to believe that 2024 is almost over! While April 30th is the tax-filing deadline for most people, the end of the calendar year is still a significant date for many tax strategies.

While December is a busy time preparing for the holidays, you can take some simple and effective steps now to help mitigate your upcoming tax bill and make a positive impact on your overall finances.

Here is a list of key deadlines and strategies to consider as the year comes to an end, and I will go into each in more detail:

•     Tax-loss selling strategies

•     TFSA, RESP, & RRSP deadlines

•     Tax credits for charitable donations

•     Planning for incorporated business owners

Tax-Loss Selling Strategies

If you had some gains in a non-registered account from the robust stock-market appreciation last year, you need to determine whether to offset those gains with capital losses from investments that are currently trading at a loss.

You can sell a position at a loss and wait 30 days before re-buying to avoid attribution, or you can re-invest in another investment altogether to avoid missing an upside swing in the market. Markets can be volatile so I would advise to remain invested if you are investing for the long term!

To utilize this strategy, first, add up the capital gains you have realized either this year or the previous 3 years and identify and sell investments that are in loss positions to offset the gains.

Ensure you action this strategy by December 30th to have it count for the 2024 tax year, to include the settlement of the position being sold.

Upcoming TFSA, RESP, & RRSP Deadlines

Given the recent stock market decline, there is now an excellent opportunity to utilize any of the above-mentioned registered accounts if you have pushed off doing so and are looking to invest for the long term. These accounts offer either tax-free or tax-deferred gains, along with government grants available for RESP accounts for a child’s education.

Please reach out directly if I can help guide you on where to put your contributions.

Tax Credits for Charitable Donations

 For donations made to a registered charity, the Federal tax credits received will be 15% for the first $200 of donations and 29% for all additional donations. This is a great way to support a cause that you care about while getting a tax break.

Donating investments in-kind to a charity can serve as a double tax benefit, as you get a donation receipt for the fair market value of the donation and do not pay tax on any capital gains. Therefore, donating non-registered investments that have increased in value can be a better option than donating cash if you were looking to make a donation either way.

For a donation to be claimed as a tax credit for the current tax year it must be made on or prior to Dec. 31st.

Planning for Incorporated Business Owners

If you are incorporated, here are a few things to consider before year-end:

• Paying out salary/dividends for the year. Where you can show that a family member has worked in the business, you may be able to pay them a reasonable salary.
• Planning for investments held within your corporation, particularly if it benefits from the “small business deduction” on active business income. Tax rules phase out the small business deduction limit of an associated corporate group once its passive investment income from the prior year exceeds $50,000.
• Declaration of “capital dividends” from your corporation’s “capital dividend account.” Capital dividends are favorable because they are tax-free distributions to Canadian resident shareholders.
• If it makes sense to implement tax-loss selling in your corporate investment portfolio, you may want to review whether there is a positive balance in the capital dividend account and whether to declare a capital dividend prior to selling investments. This is because capital losses realized will immediately decrease the capital dividend account balance.

As always, consult your accountant or tax professional prior to making any decisions that can have an accounting impact.

For a more detailed year-end tax checklist and upcoming deadlines, please read this article for a detailed checklist:

2024 Year-end tax planning checklist

Thanks for reading!

If you enjoyed the newsletter and found it helpful, don’t forget to subscribe for future updates, and please feel free to share with a friend who would benefit from this information. If you want additional information or resources on this topic, please reach out to me directly.

All the best until next time!

Nathan Biren, Financial Advisor Associate

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