A Few Year-End Tax Reminders

MONDAY, DECEMBER 18, 2023 

As the calendar year end approaches, we offer below a few reminders on time sensitive items.

RRSP

The RRSP contribution deadline for the 2023 tax year is February 29, 2024.  The contribution limit is 18% of your 2023 earned income, to a maximum of $30,780.  Double check your RRSP contribution space with CRA or call RMR for your balance.

If you are given a bonus from your employer, consider having your employer deposit it directly into your RRSP if you have available contribution room. This will reduce the taxes withheld on your bonus.

Registered Education Savings Plan (RESP)

If you have children, consider making an RESP contribution. You receive a 20% government grant up to $500 every year for every dollar you contribute to the plan. To receive the maximum government grant, you will need to contribute $2,500 for the year.  The investment income earned on your contribution and the grant combined cumulates tax free.  Each child is entitled to a lifetime grant maximum of $7,200. There are special considerations for children who are 16/17 of age so check with your investment advisor before you make the contribution.

If your children are starting at university work on a withdrawal strategy to ensure that all the funds are removed during their school years.  If you end up with funds in the plan at the end of their post secondary education the rules can trip you up and you can lose some of the benefit of the plan.

First Time Home Buyers Savings Account

We wrote about this on our last blog post – if you missed it its worth looking if you are either a potential first time buyer or have children that are approaching that stage in life. 

Tax Free Savings Account (TFSA)

The maximum amount you are allowed to contribute to your TFSA account is $6,500 for 2023 as long as you are 18 or over and a resident in Canada.  TFSA room is cumulative so check with CRA on your contribution room.  Anyone with personal funds available for investment should have a TFSA – this is the one place where you can earn funds and never pay tax on the earnings.

If you know you need to withdraw funds from your TFSA in 2024, consider withdrawing funds before the end of 2023 instead. Withdrawals from a TFSA can be re-contributed to the TFSA account in the next calendar year so drawing out the money at the end of 2023 means you can recontribute in 2024 instead of having to wait until 2025.

Crystalizing Capital Gains/Losses

If you have realized capital gains during the year, consider selling securities with a capital loss to offset the gains. Ensure you do not reacquire the shares within 30 days as this would defer recognition of the loss. For higher income earners every $100 in capital gains you shelter, you reduce tax by $27.

Income planning

If you have low income for the year, consider withdrawing funds from your RRSP.  This should be done ahead of year-end.

If you own a corporation, consider paying a salary or bonus from your corporation to yourself in December to optimize personal and corporate tax planning. Usually the payroll taxes for this is due by January 15th (may be sooner depending on your remitter type).

Charitable donations

Consider donating public stocks with accrued gains.  By donating stocks, you avoid paying tax on capital gains. For every $1000 you donate, you also save up to $500 in tax. For the donation to count towards the 2023 tax year, they must be made on or before December 31, 2023 so consider donating soon if it’s on your radar.  With stock donations, please remember that there is paperwork required to transfer the shares and this needs to happen by year end so check with your investment advisor as to the deadline.

Balance-due date for corporations – with higher interest rates its important to pay on time

The due date for investment businesses and corporations with taxable income greater than $500,000 is two months after the year end. Payments made late will be subject to interest. Only CCPCs with taxable income in the prior year below the small business deduction limit they are claiming, have a three-month balance-due date.

If you have any questions please reach out to us.