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Year End Tax Tips Thumbnail

Year End Tax Tips

Tax & Estate

As the year winds down, it's the perfect opportunity to evaluate your finances and leverage tax-saving strategies. Whether optimizing your investments, planning major purchases, or navigating financial decisions, acting before December 31 can help reduce your tax liability and position you for a prosperous 2025.

 

Tax-Loss Selling

Selling underperforming investments in non-registered accounts can offset realized capital gains elsewhere in your portfolio. Watch for foreign exchange fluctuations on international holdings, as currency changes may lead to unexpected gains or losses. Ensure transactions settle by December 31 for the losses to count in 2024.

RRSP Contributions

You have until March 3, 2025, to make contributions for the 2024 tax year, but contributing earlier allows more time for tax-deferred growth. The 2024 limit is 18% of 2023 earned income, up to $31,560, plus unused room from previous years. Maximize contributions to benefit sooner.

Spousal RRSP Contributions

High-income earners can contribute to a spousal RRSP to split future retirement income. Withdrawals within three years are attributed back to the contributor, so contributing in December rather than early 2025 starts the three-year clock earlier.

RRIF Withdrawals and Pension Income Tax Credit

If you’re 65 or older, RRIF withdrawals can qualify for the federal non-refundable pension income tax credit, saving up to $300 annually. Spouses aged 65+ without pension income can benefit by splitting pension income.

TFSA Contributions and Withdrawals

The 2024 TFSA contribution limit is $7,000, with cumulative room reaching $95,000 for eligible Canadians. If planning a withdrawal, do so before December 31 to reinstate the contribution room for 2025.

First Home Savings Account (FHSA) Opening and Contributions

First-time homebuyers can open and fund an FHSA before year-end to maximize tax benefits and carry-forward room. Contributions are tax-deductible, and withdrawals are tax-free for qualifying home purchases.

Renovation Credits

  • Home Accessibility Tax Credit (HATC): Provides a 15% credit on up to $20,000 of eligible expenses for seniors and individuals with disabilities, saving up to $3,000.
  • Multigenerational Home Renovation Tax Credit (MHRTC): Offers a 15% refundable credit on up to $50,000 for creating a secondary unit for a relative, saving up to $7,500.

RESP Contributions and Withdrawals

RESP contributions by December 31 maximize the Canada Education Savings Grant (CESG), offering 20% on the first $2,500 annually. Consider withdrawals for post-secondary students, as the income is taxable in their hands, often at minimal or zero tax rates.

RDSP Contributions

Canadians eligible for the Disability Tax Credit should contribute to RDSPs by year-end to secure the Canada Disability Savings Grant and Bond for 2024.

Medical Expense Tax Credits

Medical expenses exceeding 3% of net income or $2,759 qualify for credits. Review expenses from any 12-month period ending in 2024 to maximize claims..

Donate Publicly Traded Securities

Donating securities in-kind eliminates capital gains taxes and provides a full tax receipt for the fair market value, making this a highly tax-efficient way to give.

Planning for Tax Rate Changes

Anticipate changes to your tax rate in 2025:

  • If rates increase: Accelerate income into 2024, such as bonuses or realized gains.
  • If rates decrease: Defer income to 2025, delaying sales or option exercises.

 

Taking proactive steps to optimize your finances can yield significant tax savings and set the stage for a strong start to 2025. Act now to make the most of available opportunities and prepare for a prosperous new year.