Year-End Tax Tips for 2013
It seems as we grow older, each year passes more quickly and before you know it we are celebrating a New Year. So as we approach the end of another busy year there are certain things that you must keep in mind if you want to keep your financial matters in order and up to date.
1. Pay any investment expenses (including interest) by Dec. 31
In order to be able to deduct any investment related expenses on the 2013 tax return, the amounts must be actually paid by year-end. Such expenses include interest paid on money borrowed for investing, investment counselling fees for non-registered accounts, professional accounting services for tracking rental or business income and safety deposit box rental fees.
2. Registered Retirement Savings Plan (RRSP) annuitants who turn(ed) 71 in 2013
If you are (or will turn) 71 this year, you must convert your RRSP into either a Registered Retirement Income Fund (RRIF) or an annuity by December 31st. In addition, you only have until December 31st to make your last RRSP contribution, if you plan to do so. You do not have the advantage of procrastinating until March 1, 2014. This strategy is simple – contribute a lump sum (up to the amount of your unused contribution room) before closing out your RRSP and then claim the tax deduction in future years, whenever is most beneficial to you.
RRSP deductions can be carried forward indefinitely and spread out over several years to lower your taxable earnings in retirement and reduce the clawback of income-tested government benefits such as Old Age Security (OAS). If, however, you have a spouse or partner who’s under 72, you can continue contributing to a spousal RRSP, provided you still have contribution room.
3. Tax Free Savings Account (TFSA) contribution of $5,500 in 2013 plus any past due amounts to 2009
You have until December 31st to make your 2013 TFSA contribution or past unused contribution. A couple can each contribute $5,500 annually, plus any unused amounts that you have not contributed to your TFSA going back to 2009. If you have maximized your TFSA contribution by being at the $25,500 limit and you made a withdrawal from your TFSA in 2013 you have to wait until January 2014 to deposit that amount back into your TFSA. If you do it 2013 you will be deemed to have over-contributed and will be penalized by CRA.
4. Registered Education Savings Plan (RESP)
The RESP allows individuals to save for (grand) children’s post-secondary level education in a tax-effective manner. The government will also help you save by providing a Canada Education Savings Grant (CESG) equal to 20% of the first $2,500 of annual RESP contributions per child, or $500 annually. The deadline to get the 2013 CESG is December 31st. There are no grants available for children past the age of 17, so if they turned 17 this year you can still contribute $5,000 before the end of the year to qualify for the maximum grant available which is $1,000. On a $5,000 deposit that works out to be a nice 20% return on your investment.
5. Charitable donations
December 31st is also the last day to make a donation and get a tax receipt for 2013. Keep in mind that gifting publicly traded securities, including mutual funds, with accrued capital gains to a registered charity or a private foundation not only entitles the donor to a tax receipt for the fair market value of the security being donated but eliminates any capital gains tax as well.
6. Tax-loss selling
Finally, in the area of year-end tax-loss selling, to guarantee that a trade is settled in 2013, the trade date must be December 22, 2013, or earlier. This will make sure that the settlement also takes place in 2013 and that any losses realized are available this year. Any trade made after December 22, 2013, will not settle until 2014 and therefore those losses would not be available until next year.
To find out more about the year-end tax tips talk to your financial advisor or contact Rick at CRS Financial Group: Call 604-787-3359 or email: firstname.lastname@example.org