Year End Tax Planning

As the year comes to a close, now is the perfect time to consider your financial situation and take proactive steps to minimize your tax liability for the year. Effective year-end tax planning can help you maximize deductions, defer income, and position yourself for a strong financial start in the new year. Some of these items can be done early in 2025 (such as RRSP contributions) but there are other items to consider along with this. 

1. Triggering Capital Gains/Losses

Points to consider:

- Triggering capital gains to make use of prior year capital losses
- Triggering capital losses to make use of current or prior year capital losses. Capital losses can be carried back 3 years or carried forward indefinitely. Be aware of the superficial loss rule in this case, when triggering capital losses the position cannot be bought back within the following 30 days.

2. TFSA (Tax Free Saving Account) Withdrawals

Points to consider:

- If cash is required, consider TFSA withdrawals before the end of the year. By doing this, any amounts withdrawn in 2024 will be able to be recontributed back into your TFSA on January 1st, 2025.
- The same situation applies to TFSA withdrawals to contribute to FHSA (First Home Savings Account) or RRSP (Registered Retirement Savings Plan) accounts. If you need to pull from your TFSA to contribute to other registered accounts, make these withdrawals before the end of the year so that on January 1st 2025 you can contribute the funds back into your TFSA.

3. Maxing out RESP/RDSP Accounts

Points to consider:

- If you haven't maximized the contributions to your RESP (Registered Education Savings Plan) or RDSP (Registered Disability Savings Plan) accounts, the deadline to do so is Dec. 31, 2024. 
- Contributions to RESP accounts will gather a minimum 20% matching contribution from the government, with potentially more depending on your net family income.
- Contributions to RDSP accounts could gather a $4,000 grant from the government with as little as a $1,000 contribution.

4. Flow Through Share Deductions

Points to consider: 

- Additional deductions for high income earners beyond traditional RRSP deductions can also be an option. Although many traditional ways of investing in flow through shares involve market risk, there are transactions where you can sell your shares to a third party the same day as acquiring the shares, eliminating the investment risk. 
- The new AMT (Alternative Minimum Tax) rules do make this less appealing since you might not be able to take as many deductions as you did previously.

Since your situation is unique, please reach out to me directly if you have questions regarding your personal circumstance or if you're wondering if any of these items apply to you. 

Best,

Jon


Jonathan Adomait
Financial Planner | CFP, CIM, B.Eng