Monthly Archives: December 2010

Tax Saving Opportunities

Leave a reply

Tax Saving OpportunitiesIt’s that time of year again when you still have time to arrange your finances to reduce your income taxes before year-end. There are only a few weeks left before the end of the year for Tax Saving Opportunities. Once Jan 1st rolls around it will be time to begin focusing on the next tax year. Also managing your tax liability. Some tax planning activities apply all year long. While others are more specific to the end of the year in terms of tax management. Talk to your tax accountant to review what steps are needed to minimize your tax commitment for the year.

Tax Saving Opportunities

Consider tax reduction strategies that stem from offsetting capital gains with losses. Also writing off interest expense and other certain year-end activities that must be completed by December 31 in order to realize tax savings in 2010.

Here are five-year end tips that may help Canadian families and individuals in terms of tax planning. You should always discuss your personal situation with your investment or tax adviser before making any decisions. Individual situations can vary widely. The impact of various strategies can have a wide impact as well, both negative as well as positive.

If you are an American, you may also be able to take advantage of some of these considerations. However, you should review your opportunities with a US financial adviser.

Turn losing investments into potential savings

Tax-loss selling is the practice of selling securities that are in an accrued loss position at year-end. Investors do this in order to offset capital gains realized earlier in the year. When tax-loss selling, to guarantee that a trade of public securities is settled in 2019, the trade date must be December 24, 2019, or earlier. This ensures the settlement takes place in 2019. Also that any losses realized are available to the taxpayer this year. Any trade made after December 24, 2019, will not settle until 2020. As a result herefore those losses would not be available until next year.

If you’re hopeful that a losing investment will recover and you’re thinking of buying it back shortly after selling, be wary of the superficial loss rule. A superficial loss occurs when you or you sell an investment to realize the loss. Then buy it back within 30 days after the sale date. The CRA can deny a superficial loss. They can instead add it back to the adjusted cost base (tax cost) of the repurchased security. This means the benefit of the capital loss can only be obtained when the repurchased security is sold again and not repurchased within 30 days.

Turning 71 in 2010, it’s time to convert your RRSP

Canadians with Registered Retirement Savings Plan (RRSP) annuitants who turned 71 in 2019 must convert their RRSPs into either a Registered Retirement Income Fund (RRIF) or a registered annuity on or before December 31, 2019. And if you plan on making any final contributions to your RRSP, you will only have until December 31 to do so as you no longer have the extra sixty-day advantage of delaying until March 1, 2020. If, however, your spouse or partner is under 72, you can continue contributing to a spousal RRSP in his or her name. This assumes you still have contribution room.

Finally, if you’re 71 and don’t have a younger spouse or partner but still have earned income from 2019 that will create RRSP contribution room for 2020. Consider making a deliberate over-contribution in December 2019 before converting to an RRIF. While you will pay a penalty tax of 1% on the over-contribution for the month of December, when the new RRSP room opens up on January 1, 2020, the over-contribution problem disappears.. You can deduct the 2019 contribution in 2020 or a future year.

Contribute to an RESP to generate future savings

If you have a child or grandchild who has never participated as a beneficiary in a Registered Education Savings Plan (RESP) and who turned 15 sometime in 2019, December 31 is your last chance to contribute at least $2,000 to his or her RESP in order to collect the 20% Canada Education Savings Grant (CESG) for 2019 and create eligibility for CESGs in 2020 and 2021. If you miss the deadline, the child or grandchild will not be eligible for any CESGs in the future.

Spread some goodwill by making donations

December 31 is the last day to make a donation and get a tax receipt for 2010. Keep in mind that gifting publicly-traded securities, mutual funds, or segregated funds with accrued capital gains to a registered charity not only entitles you to a tax receipt for the fair market value of the security or fund being donated but eliminates any capital gains tax as well.

Pay off investment expenses and interest

In order for you to deduct any investment-related expenses on your 2019 tax return, the amounts must actually be paid by year-end (December 31).

Such expenses include interest paid on money borrowed for investing. In addition to investment counseling fees for non-registered accounts. Also for professional accounting services for tracking rental or business income and safety deposit box rental fees.

As always, discuss all tax-planning strategies with a financial advisor or tax professional to properly determine your risk and eligibility. There may be other potential tax-savings opportunities depending on your personal situation.

Small Business Tax Savings

Leave a reply

Small Business Tax SavingsPerhaps you are a  small business owner. Your corporate year end coincides with the end of the year. There are some things you can do before year end to save on tax before the new year. Small Business Tax Savings can be an important part of your revenue stream.

Many small business owners find themselves busy wrapping up their fiscal year end by maximizing sales. Making sure that all shipments are on their way before year end. They could be missing out on substantial  tax savings. If they fail to take advantage of  opportunities their company’s income tax commitment could be high.

Small Business Tax Savings

Small business owners have some unique tax-saving strategies they can employ. These strategies should help boost their overall savings for the current tax year.  For example, perhaps you’ve been mulling over the purchase of new business assets. Purchasing these assets prior to the end of your tax year could be the most advantageous time to take action from a tax perspective. Sales tax rebates, additional depreciation claims etc can be maximized if you purchase these things prior to your corporate year end.

Discuss These Issues with Your Accountants

Discuss year-end tax strategies with a financial adviser or tax professional. Many of these activities must be completed by December 31st if this is the end of your company’s tax year in order to realize tax savings.

There are a couple of areas that small business owners can focus on. However based on your specific business situation there may be additional areas that you can take advantage of. Talk to your tax accountant prior to the end of your year end

Now is the time to purchase business assets

If you’re self-employed or a small business owner, you may wish to consider accelerating the purchase of new business equipment. Or office furniture that you may have been planning to purchase in the following year. Under the tax rules, you are generally permitted to deduct, under the “half-year rule,” one half of a full year’s tax depreciation. Even if you bought it on the last day of the year. For 2012, you can then proceed to claim a full year’s depreciation. Check with your tax accountant on the depreciation rules in your country.

For computer equipment purchased before year end, you can write off 100 per cent of the cost in the year of acquisition. With no half-year rule in many cases. These rules will depend on where you live and the local tax rules that are applied.

Rethink year-end compensation

An incorporated business facing an approaching December 31 corporate year-end may wish to revisit the  salary-dividend mix for 2011. It may make more sense for small business owners to pay themselves exclusively through dividends rather than salary in 2012. This precludes them from making an RRSP contribution next year as dividends are not considered “earned income”. They may be better off saving money inside their corporations rather than inside an RRSP.

Talk to your adviser about the potential tax savings advantage dividends may offer over salary. Also about the tax deferral advantage of leaving funds inside the company as opposed to paying them out immediately.

Have your corporation reimburse rewards-paid travel

Some owners use personally-earned credit card rewards points, such as Aeroplan Miles, to travel for business. Have your corporation reimburse you for the value of the travel. Your corporation can deduct the expense and it may be  non-taxable to you personally.

Make sure tax-planning for your business stays a priority all year long. It’s important for small business owners to review these and other strategies with an adviser on a regular basis. Discussing your tax situation with a professional can help you ensure you’re taking advantage of all the available tax minimization strategies.