Don't let year-end tax planning spoil your upcoming holiday season festivities. So do that planning now.
Unless you expect to be in a sharply lower tax bracket next year, you should normally try to claim as many deductions and credits this year. Some examples:
- If you have some flexibility (and the cash), consider making charitable and political donations, and paying union dues and professional fees before Dec. 31 rather than early in 2016.
- You may calculate medical and dental expenses for any 12-month period. So even if you have, for example, treatments and expenses coming up early next year, you could prepay them if that would maximize the total for a 12-month period ending this year.
- If you already have or will have capital gains this year, consider selling some losers (whose sale you have already been considering) so you can use the losses to offset those capital gains.
- Consider deferring the sale of assets that will produce a capital gain until next year. (When dealing with assets, give at least as much weight to the investment as the tax aspects.)
- Did family members in a lower tax bracket work in your self-employed business (including rental property)? Pay them what you would have paid an outsider, so you can shift that income out of your higher tax bracket into their lower tax bracket.
- If you turned 71 this year and want to contribute to your RRSP, you must do so before the end of the year; you don't have until the usual March 1 deadline of the following year. (And you must also action your RRSP redemption plan by Dec. 31 - or your entire RRSP will be paid out and added to your income for 2016.)
- If you pay income tax by quarterly instalments and you are behind for this year, by Dec. 15 increase your final instalment enough to reduce or eliminate the non-deductible interest (and penalties) on the shortfall.
Mike Grenby is a columnist and independent personal financial advisor; he'll answer questions in this column as space allows but cannot reply personally. [email protected]
