CHECKLIST TO BETTER YOUR YEAR-END TAX SAVINGS
By Sylvia Lim, CGA, CFP

Year end is near and before you hit the party circuit, take some time out to review your tax planning list. Here is the list of top items to take action on by December 31st to maximize your tax savings.

1) Review with your advisor and see if selling investments with accrued losses is an option worth exercising to offset your realized gains. There’s also the opportunity to apply those losses against gains made in the last three years (all the way back to 2005) to claim a tax refund. Always keep the superficial loss rule in mind. That means after selling an investment to claim the loss, it cannot be repurchased for at least 30 days.

2) If you are turning 71 by the end of this year, contribute to your RRSP for the last time by December 31st.

3) Contribute to your child or grandchild’s RESP to not miss out on this year’s Canada Education Savings Grant incentive.

4) It’s better to give than to receive. Donate public company’s securities with capital gains to registered charities and avoid paying capital gains tax. You will also receive donation receipts for the full value of the securities.

5) Defer mutual fund purchases until the new year to avoid receiving taxable distributions for this year.

6) Delay fixed income investment purchase until the new year to effectively defer its income tax by one year.

7) For unincorporated small business owners, make your needed capital purchase by year end to qualify for this year’s depreciation claim.

8) Review your RRSP and top up your (and/or your spousal) contributions if you haven’t already done so.

9) Pay year end expenses by December 31st to qualify for this year’s tax deductions. They include investment counsel fees, medical and dental expenses, trades people’s tools, children’s activities that qualify for children’s fitness credit, and childcare expenses.

10) Take stock, update and properly file tax credit documentation for the year. They include transit passes, automobile travel logbook for employees and business owners, and meals and entertainment log with clients.

Lastly, it’s a good idea to open a Tax Free Savings Account (TFSA) in the new year. Starting in 2009, you will be able to earn tax free investment income on savings up to $5,000 each year in this account. Unlike RRSP, you cannot deduct for tax purpose contributions made. However, you will not be taxed on subsequent withdrawals.

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