Written by: Tradex
In advance of our QCC Webinar “2023 Year-End Tax Opportunities – Leap into 2024 Tax-Prepared!”, here are some year-end strategies that could help you reduce your 2023 tax liability. As we enter the final weeks of 2023, now is a good time to assess your investments and take advantage of tax planning opportunities that may be available to you.
- Tax-Smart Investing
Registered Retirement Savings Plan (RRSP): Make RRSP contributions up to your available contribution room now to reduce your 2023 taxable income and allow tax-deferred growth in your plan. Contribute up to February 29th. *Is income-splitting using a Spousal RRSP more suitable for you? *
Tax-Free First Home Savings Account (FHSA): If you are a “qualifying individual,” consider opening an FHSA by year-end and contributing. You can contribute up to $8,000 per calendar year (subject to a lifetime contribution limit of $40,000), which is tax-deductible against that year’s income. Opening an FHSA by year-end would allow you to contribute remainder to $16,000 in 2024. Qualifying withdrawals are tax-free, or you can transfer the balance to your RRSP without affecting your contribution room. *Be aware that a plan must be opened to protect your contribution room*
- Claim deduction and credits: pay tax-deductible expenses by claiming various deductions and credits, such as investment management fees, medical expenses, childcare expenses, charitable donations, and possible use of any spousal loans to reduce your tax liability. *Consider In-kind charitable donations before year-end *
Profit From Gains and Losses
- Tax-Loss Selling Strategies
Consider selling investments with accrued losses in non-registered accounts by December 27 to offset capital gains realized elsewhere in your portfolio. Any unused capital losses can either be carried back three years or carried forward indefinitely to offset net capital gains in future years. *Be mindful of distributions and consider transactions to avoid the tax on them*
- Defer Capital Gains: If you plan on selling non-registered investments with unrealized capital gains consider deferring the sale until the new year. By deferring the sale of an unrealized gain until January 1, 2024, the tax associated with the gain is not due until April 30, 2025. *Be cognizant of changing tax rates*
Rising interest rates this year has brought opportunity for planning and reducing exposure to future taxes.
- Education Planning: Consider a Registered Education Savings Plans (RESP) for the benefit of your future student family members. The federal government can provide grants and bonds to RESPs which are tied to contributions made. Contribute to a RESP before the end of the year to make the most of tax-deferred growth and government grants (20% on $2,500 per beneficiary annually). *Be aware of qualifying withdrawals*
- Tax-Free Savings Account (TFSA)
Contribute to a TFSA to earn tax-free investment income. If you plan to withdraw from your TFSA soon, consider making the withdrawal by year-end so you can recontribute the amount as early as January 1, 2024. *Be mindful of your contribution room*
* BONUS *
To dive deeper, attend our Webinar on November 30th
“2023 Year-End Tax Opportunities – Leap into 2024 Tax-Prepared!”
Tax planning should be a year-round process, but now is the time to take advantage of any tax planning opportunities and minimize your tax liability in the future.