Make payments early to save on taxes

AROUND this time every year paying off some expenses before you need to can make sense - and dollars.

Year-end tax planning is especially important (and potentially profitable) for employees and retirees, who have relatively few deductions.

If your tax bracket this year is higher than your expected tax bracket next year, or even if they are the

same, consider making the payments in the following list before Dec. 31 to save the tax this year.

If your 2013 tax bracket will be higher, see if you can delay such payments until after Dec. 31.

? Safe deposit box rental, deductible loan interest, investment counsel and other investment expenses; deductible legal fees.

? Medical and dental expenses; you want the 12-month period with the highest total.

? Charitable donations; political contributions.

? Union and professional membership dues.

? Certain child and spousal support payments.

? Payments eligible for the children's fitness and arts tax credits.

Other tax planning points: If you turned 71 this year, you must wind up your RRSP by Dec. 31. So that also becomes the deadline for contributing to your RRSP for this year. However, you may continue to contribute to a spousal plan by the usual March 1 deadline of the following year if your spouse is younger than 71 and you had earned income in the previous year or unused carried forward contribution room.

If you contribute to a spousal plan by Dec. 31, that shortens by one year the time the spouse must wait before withdrawing funds in her/his name for tax purposes.

Consider tax-loss selling before Christmas to allow for the settlement paperwork if you have investments with unrealized losses so you can reduce capital gains reported in one or more of the last three years.

If you qualify for Canada Pension Plan and want to take early retirement, consider applying before Dec. 31 because lower early benefits start to be phased in next year.

If you move to another province, you are taxed in the province where you lived on Dec. 31, so compare the rates in the two provinces and plan to be a resident in the lower one on Dec. 31.

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 [email protected].