As the year winds down, it’s the perfect time to ensure your financial and tax strategies are in order. Thoughtful planning can help you take advantage of available opportunities and reduce your tax burden for 2024.
Here’s a guide covering strategies for individuals, families, and business owners:
For Investors
- Tax-Gain Selling: Consider crystallizing up to $250,000 in capital gains to benefit from the lower 50% inclusion rate.
- Tax-Loss Selling: Offset capital gains by selling underperforming investments in non-registered accounts. Remember, the deadline for settlement is December 31, 2024.
- RRSP Contributions: Maximize tax-deferred growth by contributing early; the 2024 limit is $31,560.
- TFSA Contributions & Withdrawals: Max out your TFSA contribution of $7,000 or withdraw funds before year-end to reinstate contribution room for 2025.
- Investment Expenses: Pay deductible investment expenses, such as interest or fees, by December 31.
For Families
- RESP Contributions: Claim up to $500 in Canada Education Savings Grants (CESG) by contributing $2,500 per child before year-end.
- Family Medical Expenses: Aggregate medical costs to exceed the minimum threshold and claim federal or provincial credits.
- Registered Disability Savings Plan (RDSP): Contribute before year-end to leverage government grants and bonds for eligible family members.
Homebuyers and Owners
- First Home Savings Account (FHSA): Contribute up to $16,000 if unused room from 2023 is available.
- Home Accessibility Tax Credit (HATC): Seniors and eligible individuals can claim up to $3,000 for qualifying renovations.
- Multigenerational Home Renovation Tax Credit: Claim up to $7,500 for creating a secondary housing unit for family members.
Charitable Giving
- Monetary Donations: Make donations by December 31 to benefit from combined federal and provincial credits of up to 55%.
- Gifts In-Kind: Donating appreciated securities avoids capital gains tax and still provides a tax receipt for the full value.
Business Owners
- Compensation Planning: Optimize salary and dividends to maximize RRSP contribution room or defer income for future tax efficiency.
- Passive Investment Income: Monitor passive income thresholds to maintain access to the small business deduction.
- Selling Your Business: Explore incentives like the Canadian Entrepreneurs’ Incentive (CEI) or Employee Ownership Trusts (EOTs) for significant tax savings.
Adapting to Tax Rate Changes
If you anticipate changes to your income or tax rates in 2025, shift income or deductions strategically between 2024 and 2025 to minimize taxes.
Key Deadlines
Most strategies require action by December 31, 2024, so prioritize discussions with your financial advisor or tax professional soon.
This year-end tax planning guide highlights opportunities tailored to maximize your savings. For personalized advice, connect with KMR Financial to build a strategy that aligns with your financial goals.
