Friendly Reminder – Don’t Overlook These Tax Deadlines !
As 2012 soon comes to a close, with all of the shopping, parties, travel and celebrations, next April and “tax day” seem far away. However, I would be remiss, as a real estate and business advisor, not to give you this friendly reminder to make sure to take advantage of tax planning opportunities that may disappear if you don’t act before year end.
Not as fun as giving advice on how to throw a great holiday party, but there are a number of easy ways for you to reduce taxes that you might otherwise owe… if you act before December 31. Here are but a few:
Donate to your favourite charity
December 31 is the last day to make a donation and obtain a tax receipt for 2012. You can usually donate online, with electronic tax receipts that are emailed to you instantly. For example, if your total 2012 donations exceed $200, each additional $100 donation in 2012 can get you up to $100 back, depending on your province of residence.
Contribute to an RESP for your child or grandchild
The federal government provides a Canada Education Savings Grant of 20% on the first $2,500 of annual RESP contributions per child, which can add up to $7,200 to an RESP during a child’s lifetime. If you haven’t maximized RESP contributions for your children or grandchildren, you can make an enhanced contribution in 2012.
Pay expenses by year end to be eligible for tax deductions and credits
Claiming expenses, such as interest on money borrowed for investing or student loans, daycare fees and children’s fitness or arts fees, can all provide benefits at tax time. However, you must pay these expenses by the end of the year to realize the tax savings for 2012.
Review your investments
The end of the year is a good time to review the types of investments you hold, and the accounts in which you hold them. Investments yielding highly-taxed interest income may be best-suited to RRSPs or TFSAs, while Canadian equities, which can generate favourably-taxed dividends and capital gains, may be more suited to non-registered accounts. If you are planning a TFSA withdrawal in early 2013, consider withdrawing the funds by December 31 instead, so you don’t have to wait until 2014 to be able to re-contribute that amount.
Prepare for retirement
There are a number of tax considerations for those just entering into their retirement years:
If you turned 65 in 2012 and have not yet applied for Old Age Security benefits, remember that retroactive benefits, which can be worth over $6,500, can only be claimed within a limited time. To receive those benefits, you should apply as soon as possible.
If you turned 71 in 2012, you have until December 31 to make any final contributions to your RRSP and convert it into a RRIF or registered annuity.
These are some of the most commonly overlooked ways you can act now to benefit from tax savings when you file your tax return next spring. As always, speak to your accountant or tax advisor well in advance of tax filing season to get professional advice.