– by Todd Hummel –
December is the time to make some smart financial decisions and potentially save yourself some money.
1. Tax-loss selling: December 24
December 24, 2014 is expected to be the last buy/sell date for Canadian securities to settle in 2014 (based on trade date plus three days). Always ensure a sale makes sense from an investment perspective,
since stocks sold at a loss cannot be repurchased until at least 31 days after the sale to be effective.
2. Charitable donations & other tax credits/deductions: Deadline December 31
Donating appreciated publicly-traded securities to charities provides a charitable tax receipt based on the value of the securities donated, while potentially eliminating the capital gains tax otherwise payable on the gain accrued on the security. To receive a 2014 tax receipt, ensure all charitable donations are made before December 31, 2014. December 31 is also the final payment date in order to receive a 2014 tax deduction or credit for expenses such as childcare, medical, tuition and the children’s fitness and arts tax credits.
3. Pension income
Consider creating up to $2,000 of eligible pension income. If you are age 65 +, converting a portion of your RRSP into a RRIF to receive up to $2,000 of qualifying RRIF income before the end of the year could allow you to benefit from this credit.
4. TFSA withdrawals
If you are planning to make a Tax-Free Savings Account (TFSA) withdrawal, consider making the withdrawal in December instead of during 2015. This way, the amount withdrawn is added back to your TFSA contribution limit on Jan 1, 2015 (rather than 2016).
5. RRSP contributions for those turning 71
If you turned 71 in 2014, you must collapse your RRSP by the end of the year. If you have unused RRSP contribution room, consider a final contribution before closing your RRSP. If you earned income in 2014 that will generate RRSP contribution room for 2015, consider making your 2015 RRSP contribution early in December 2014. While you will be charged a one per cent penalty tax for the month of December, the tax savings on your RRSP contribution (which can be claimed on your 2015 tax return) should exceed the penalty tax.
Opinions are those of the author and may not reflect those of BMO Nesbitt Burns Inc. (“BMO NBI”). The information and opinions contained herein have been compiled from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. BMO Nesbitt Burns Inc. is a wholly-owned subsidiary of Bank of Montreal. Member-Canadian Investor Protection Fund. Member of Investment Industry Regulatory Organization of Canada.
