Tax moves to make before 2014

As the end of each year approaches, we are pleased to offer our annual Year-End Tax Planning newsletter as a reminder to review your personal tax situation. Personal tax planning is important to the management of your financial affairs and should be considered throughout the year and not just late in the year.

Below are some ideas and tips which may be useful to you before year-end. If you wait until your tax return is due next April or June, it will be too late to change your tax situation for this year. 

 
''Year-End Survival Kit'' 
Our little gift to you for the holiday season!
Tax Loss Selling Strategies:

 

1) Calculate the capital gains that you have realized for 2013.

 

2) Identify and sell investments that are in a loss position. Trades entered by December 24th will settle funds in the account prior to December 31st.

 

3) Net your capital losses against capital gains on your 2013 tax return.

 

 

Capture RESP and RDSP grants:

 

Contribute to Registered Education Savings Plans (RESP) or Registered Disability Savings Plans (RDSP) by year end to earn grants and bonds. For RESPs the grant amount per year is 20% of the first $2500 contributed per beneficiary from the federal government with an additional 10% of the first $2500 contributed per beneficiary from the government of Quebec; for RDSPs, you may get a 3:1 match on the first $500 and 2:1 on the next $1,000 if your family income is under $80,000.

 

Review your December 15 installments:
   

If income dropped compared with 2012, you may not need to make a mid-December installment. A preliminary tax return can make sure your installment is accurate.

 
Plan your bonus:

December is the time for Christmas bonuses or tax-free perks like non-cash gifts under $500 for employees. If receiving a bonus, avoid a one-time higher tax bracket and corresponding spikes in withholding taxes by asking payroll to annualize the income and taxes over the full year.

 

Move up medical appointments:

Medical appointments to book before year end include optometrists, therapeutic massages, buying glasses, contacts, hearing aids, incontinence products, travel insurance premiums, or van alterations for wheelchairs. Pay outstanding medical bills by December 31 to claim them this year.

 

Preserve your benefits:

 

If unemployed and collecting taxable Employment Insurance benefits, you may suffer claw-backs of regular benefits if your net income exceeds $59,250 in 2013. Avoid by making an RRSP contribution.

  

Make charitable donations:

 

Donating qualifying securities instead of cash can increase your tax savings. 

 

Withdraw funds from a TFSA, if needed:

 

Any withdrawals will increase your contribution room in 2014.
Buy business assets and supplies:

Self-employed or commissioned salespersons can boost deductions by buying new cars or office supplies by year end. Buy new tires or maintenance items and top up the gas. Keep auto logs current, recording mileage on odometers on December 31.

 

Time receipt of lump sums:

 

Pay dividends from family businesses in January, not December. Plan the sale of income property to close in new year, and defer tax until April 2015.

 

Make final RRSP contribution:

 

If you are age 71 this year, you must convert your RRSP to a RRIF. Consider the following: 

  • Use your younger spouse's age for minimum payment calculations. 
  • Consider a final contribution to your RRSP for earned income from this year. 
For Corporations: 

 

  • Pay non-eligible dividends prior to year-end as the tax rates will be changing in 2014.
  • Consider delaying the sale of a business until after 2013 to take advantage of the increased Capital Gains Exemption; increased to $800,000 beginning in 2014.  
As your Tax Advisers, we offer you full range of Tax Planning, Financial Advice and Strategies to reduce your income tax throughout the year. Do not hesitate
to contact us as early as January to go over your planning for this year tax season.
We bring order to your financial life and peace of mind to your business!
 
Sincerely,
 
MAHTAB SAGHAFI, Senior finance and tax advisor 
M.I.A.G.E. Business Solutions Inc.
T: 514.426.7200 ext 101
C: 514.567.3169
Email: msaghafi@miagesolutions.com
Wishing you a Happy New Year full of Joy and Success!
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