Prime 10 tax suggestions you must think about earlier than Dec. 31

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With only a week to go till the top of 2021, right here’s my prime 10, time-sensitive tax-planning suggestions you should do by Dec. 31, relying in your particular person circumstances.

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1. Contribute to charity : You should make any charitable contributions by Dec. 31 to get the tax credit score in your 2021 return. As a reminder, charitable donations to registered charities (or donor-advised funds) entice each federal and provincial non-refundable tax credit.

On the federal facet, you get a credit score of 15 per cent for the primary $200 of annual charitable donations. For cumulative donations above $200, the federal credit score fee jumps to 29 per cent (and might be as excessive as 33 per cent in case your taxable revenue exceeds $216,511 in 2021). Provincial and territorial donation credit work equally, offering you with a mixed donation credit score fee of between 20 per cent and 54 per cent relying on the quantity you donate, your revenue stage and your province or territory of residence.

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As a reminder, when you donate appreciated marketable securities or mutual funds “in sort” to charity, you’ll get a donation receipt for the honest market worth and remove any capital good points tax. However act shortly, as a result of it might take a couple of days for the securities to really get transferred when you’ve put in a request to your brokerage.

2. Tax-loss promoting : Should you plan to set off any capital losses on investments in 2021, both to offset different capital good points realized this yr, use in opposition to mutual fund capital good points distributions allotted to you, or to maybe carry again to the 2020, 2019 or 2018 tax years, you’ll want to make sure the commerce settles in 2021. For this to happen, the commerce date have to be no later than Dec. 29 to finish settlement by Dec. 31.

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3. Take TFSA withdrawals : Should you withdraw funds from a tax-free financial savings account (TFSA), an equal quantity of TFSA contribution room can be reinstated within the following calendar yr. If you’re planning a TFSA withdrawal in early 2022, think about withdrawing the funds by Dec. 31 so that you don’t have to attend till 2023 to re-contribute that quantity do you have to want to take action.

4. Switch your RRSP to a RRIF : Should you turned 71 in 2021, you’ve till Dec. 31 to switch your registered retirement financial savings plan (RRSP) to a registered retirement revenue fund (RRIF). Beginning in 2022, you may be required to withdraw a minimal quantity annually primarily based in your age (or the age of your youthful partner or accomplice, if that’s what you initially select upon setup). Should you turned 71 this yr, your minimal required withdrawal subsequent yr can be 5.28 per cent of the honest market worth of your RRIF as of Jan. 1, 2022.

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5. Make a ultimate RRSP contribution : If you must switch your RRSP to a RRIF this yr since you turned 71 in 2021, be sure you make any ultimate RRSP contribution by Dec. 31 because you don’t have the conventional 60 days following year-end to take action this yr. If in case you have a youthful partner or accomplice, nonetheless, this is probably not vital as you can nonetheless select to contribute to a spousal (accomplice) RRSP by the conventional March 1, 2022, RRSP deadline.

6. Make a deliberate overcontribution to your RRSP : Equally, when you turned 71 in 2021 and you’ve got earned revenue, akin to (self-) employment revenue or rental revenue that may create RRSP contribution room for 2022, think about a one-time deliberate over-contribution to your RRSP this month. You’ll pay a small over-contribution penalty tax of 1 per cent of the over-contributed quantity (above a $2,000 permitted overage) for the month of December, however you’ll be capable of deduct that contribution in 2022 (or past) and the penalty tax will stop. Notice, once more, that when you’ve got a youthful partner or accomplice, this isn’t vital, as you can proceed to contribute to a spousal (accomplice) RRSP even past age 71, assuming you’ve the contribution room.

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7. Withdraw at the least $2,000 from a RRIF : When you’re 65, RRIF withdrawals (however not RRSP withdrawals) qualify for the $2,000 pension revenue credit score, each federally and provincially. Should you in any other case don’t have any pension revenue in 2021, think about changing a portion of your RRSP to a RRIF when you flip 65 to benefit from the annual pension revenue credit score on $2,000 of annual RRIF withdrawals (or $4,000, when you elect to separate pension revenue along with your partner or accomplice who can also be at the least 65 years previous and has no different pension revenue).

8. Pay curiosity expense : Should you borrowed cash for the aim of incomes enterprise or funding revenue, be sure you pay your curiosity by Dec. 31 to say a deduction in your 2021 tax return.

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9. Take instructional help funds : If in case you have contributed to a registered training financial savings plan (RESP) for a pupil who attended a post-secondary instructional establishment in 2021, you might want to withdraw some instructional help funds (EAPs) earlier than Dec. 31. Though the quantity of the EAP can be included within the pupil’s revenue for 2021, relying on the coed’s different revenue, maybe from part-time or summer time employment, the EAP revenue can be successfully tax free if the coed has ample private tax credit, together with the improved federal fundamental private quantity of roughly $13,800, and tuition charges eligible for the tutoring tax credit score.

10. Make RESP contributions : Lastly, in case your (grand)baby turned 15 this yr and has by no means been a beneficiary of an RESP, no Canada Schooling Financial savings Grants (CESGs) — price 20 per cent of your annual contributions as much as an annual most of $500 ($1,000 if CESG carryforward room exists), might be obtained in future years until at the least $2,000 is contributed to an RESP by the top of the yr. Take into account making an RESP contribution by Dec. 31 to obtain the present yr’s CESG and doubtlessly create CESG eligibility for 2022 and 2023.

Jamie Golombek, CPA, CA, CFP, CLU, TEP is the managing director, Tax & Property Planning with CIBC Personal Wealth in Toronto. [email protected]

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