December 31, 2019 is fast approaching. Check out our list of 19 Tips for Year-End Tax Planning.
If any of these apply to you, or you have any questions, please contact us for further details or to discuss how we can apply them to improve your individual tax situation.
SOME 2019 YEAR-END TAX PLANNING TIPS INCLUDE:
- If you’ve had the following expenses this past year, they may be eligible for tax deductions or credits (so keep your receipts!): moving expenses, child care expenses, charitable donations, political contributions, medical expenses, alimony, eligible employment expenses, union, professional, or like dues, carrying charges and interest expense.
- If you own a business or rental property, consider paying a reasonable salary to family members for services rendered. Salary payments require source deductions (such as CPP, EI and payroll taxes) to be remitted to CRA on a timely basis, in addition to T4 filings.
- A senior whose 2019 net income exceeds $77,580 will lose all, or part, of their Old Age Security pension. Senior citizens will also begin to lose their age credit if their net income exceeds $37,790. Consider limiting income in excess of these amounts if possible.
- You have until Monday, March 2, 2020 to make tax deductible Registered Retirement Savings Plan (RRSP) contributions for the 2019 year. Consider the higher income earning individual contributing to their spouse’s RRSP via a “spousal RRSP” for greater tax savings.
- Individuals 18 years of age and older may deposit up to $6,000 into a Tax-Free Savings Account in 2019. Consider a catch-up contribution if you have not contributed the maximum amounts for prior years. An individual’s contribution room can be found online on CRA’s My Account.
We all know that higher levels of personal income are taxed at higher personal rates, while lower levels are taxed at lower rates. It’s, therefore, important to adjust income out of high income years and into low income years, whenever possible. There are a variety of different ways to smooth income over a number of years to ensure an individual is maximizing access to the lowest marginal tax rates. For example:
• Taking more, or less, earnings out of the company (in respect of owner-managed companies).
• Realizing investments with a capital gain/loss.
• Deciding whether to claim RRSP contributions made in the current year, or carry-forward the contributions.
• Withdrawing funds from an RRSP to increase income. Care should be given, however, to the loss in RRSP room based on the withdrawal.
• Deciding on whether or not to claim CCA on assets used to earn rental/business income.