Canada’s new Liberal government ran their election platform with several initiatives and promises that will affect taxpayers. Amongst other things, they promised to:
- Reduce the TFSA annual contribution limit from $10,000 to $5,500;
- Increase the federal tax rate by 4% for individuals with taxable income over $200,000;
- Effect a 1.5% decrease in the federal tax rate for individuals with taxable income between $44,701 and $89,401, the middle class tax cut.
The exact timing of the above changes is not known. While the following list is not exhaustive, here are some items that must be considered, incurred or paid prior to year-end in order to be included in your 2015 tax return.
Prior to December 24, 2015, put tax loss selling strategies to work by following these steps:
- Calculate the capital gains that you have realized for 2015.
- Identify and sell investments that are in a loss position in your non-registered accounts. Trades entered by December 24th will settle funds in the account prior to December 31st. (Remember that you can’t buy the exact same investment back again within the next 31 days)
- Net your capital losses against capital gains on your 2015 tax return.
Prior to December 31, 2015:
- Contribute the maximum amount possible to your TFSA to ensure the 2015 maximum of $10,000 is not lost by future changes.
- Make charitable donations using qualifying securities instead of cash.
- Contribute to your child’s RESP/RDSP.
- Withdraw funds from your RRSP if you are in a low tax bracket for the 2015 tax year.
- 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.
- Make a final contribution to your RRSP based on earned income this year.
- If you are a trustee of a testamentary trust, consider triggering income (like capital gains) before the end of the year as income retained inside the trust will be taxed at the highest marginal tax rate starting in 2016.
We recommend that you discuss these strategies with your professional investment, tax and legal advisors prior to implementation to ensure that they fit within your overall wealth plan.
The information above is a sampling of our full 2015 Year-end Tax Planning Checklist. There are many more and important considerations that are included in full article. To view the entire article, please visit our website at www.phillipsfortress.ca.
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