2012 Tax Planning

December 6, 2012

canadian-taxes

Prepared by Heather Loblaw CA, MacKay LLP

As another tax year is coming to an end, you may be wondering if there are important tax deadlines or you may be considering ways to reduce your taxes for 2012.

Here are a few items to consider:

  1. Charitable Donations and Political Contributions: Make all donations and gifts on or before December 31.
  2. Deductible Expenses: Pay financial advisors, safety deposit box charges, alimony/maintenance payments, and any childcare fees on or before December 31.
  3. RRSPs: Maximize your RRSP contribution on or before March 1, 2013. If you have turned 71 in 2012, RRSPs must be terminated and, to avoid being fully taxable in 2012, converted to a RRIF by December 31.
  4. RESPs: Make a contribution of at least $2,500 per child to receive the maximum Canada Education Savings Grant of $500 per child (20% of contribution to maximum of $500 per year if beneficiary is under 18).
  5. TFSAs: Maximize your contribution for 2012 of $5,000 into a Tax Free Savings Account in which all income earned is tax-free for life. If you plan to withdrawal, do so before the end of 2012 instead of in 2013, if possible. This is because the amounts withdrawn increase your contribution room following the year in which the withdrawal took place.
  6. CPP: Make your early application for CPP before the end of 2012. Changes to the CPP rules mean that those applying before age 65 will receive a smaller benefit if they apply in 2013 as opposed to 2012.
  7. Capital Losses: Trigger unrealized capital losses to reduce your tax burden on capital gains during the year, or apply to capital gains in any of the preceding three years. This must be done three business days prior to the end of the year in order to allow enough time for the dispositions to be settled in the 2012 calendar year. Consider making all last minute dispositions before December 22. It is important to note that the loss will be denied if identical property is purchased 30 days before or 30 days after the transaction date by you or someone affiliated with you. So be mindful of the timing if you plan on repurchasing the property.
  8. Children’s Sports and Arts Tax Credits: Prepay any 2013 classes if you have not reached the $500 maximum limit per child in 2012 for each of the sports and arts credits.
  9. Income: Review with your tax advisor the optimal mix of salary, bonus and dividends for you and other family members for 2012 in order to meet your tax and non-tax planning objectives.
  10. Tax Instalments: Pay tax instalments or catch up on deficient instalments, if required to do so, by December 15. Late or deficient instalment payments may result in interest charges at the time your return is assessed.

As individual circumstances may vary, we strongly advise you to consult your accounting or tax professional if you are considering any of the above.

mackay

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