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George Ripoll

Investment Advisor

George Ripoll


311 George Street N
Peterborough, ON
K9J 3H3

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2018 Year-end Tax Planning Tips

Since many tax strategies require foresight to be effective, tax planning should be a year-round activity. However, as year-end approaches there are still opportunities to consider in order to reduce your 2018 tax bill. The following are year-end tax-saving strategies that may be available, depending on your personal situation.

1. Tax-loss selling 

Deadline: December 27 

Thursday, December 27, 2018 is expected to be the last buy/sell date for securities to settle in 2018 (based on trade date plus two days). You may want to review your non-registered investment portfolio to consider a sale of any securities with accrued losses to offset any capital gains realized in the year – or the three previous taxation years (if a net capital loss is created in the current year). It is important to ensure that a tax-loss 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 and other tax credits/ deductions
Deadline: December 31 ​

Instead of donating cash to a charity, consider donating appreciated publicly-traded securities. This strategy provides a charitable tax receipt based on the value of the securities donated, while potentially eliminating the capital gains tax otherwise payable on these securities if they were sold. In order to receive a tax receipt for 2018, you must ensure all charitable donations are made before December 31, 2018. 

December 31 is also the final payment date in order to receive a 2018 tax deduction or credit for expenses such as childcare, medical and tuition tax credits. 

3. Pension income ​
Deadline: December 31 ​

If you are not already taking full advantage of the Federal Pension Income Tax Credit, consider creating up to $2,000 of eligible pension income. If you are age 65 or older, converting a portion of your Registered Retirement Savings Plan (“RRSP”) into a Registered Retirement Income Fund (“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 ​
Deadline: December 31

f you’re planning to make a Tax-Free Savings Account (“TFSA”) withdrawal in the near future, consider making the withdrawal in December instead of waiting until 2019. This way, the amount withdrawn will be added back to your TFSA contribution limit on January 1, 2019 (rather than 2020). 

5. RRSP contributions for those turning 71
Deadline: December 31

If you turned 71 years of age in 2018, you must collapse your RRSP by the end of the year. If you have unused RRSP contribution room, consider making a final RRSP contribution before closing your RRSP. And, if you have any earned income in 2018 that will generate RRSP contribution room for 2019, consider making your 2019 RRSP contribution early – in December 2018. 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 2019 tax return) should exceed the penalty tax.

6. Payment of quarterly tax installments
Deadline: December 15

Many Canadian investors are required to make quarterly income tax instalment payments since tax is not deducted at source on investment income. If your estimated net income tax payable for the year, and net payable for either of the two preceding years, exceeds $3,000 ($1,800 for Quebec residents), you may be required to pay income tax instalments. Personal tax instalments are due four times a year, with the final instalment due December 15. 

If you fall short on any required instalments, non-deductible interest or penalties may be incurred. Therefore, it is important to determine if your year-to-date instalments are sufficient – in light of these requirements – based on your estimated income tax payable for the year. 

7. Private corporation tax planning - Income-splitting
Deadline: December 31

For individuals with private businesses, new tax legislation which took effect in 2018 will significantly restrict the ability for many business owners to split income with their family members using private corporations. However, the new rules provide specific exceptions to ensure certain family members who have a sufficient direct equity investment in eligible private corporations are not impacted. These rules provide a transitional provision that allows these requirements to be met by December 31, 2018.

Accordingly, private business owners should review their existing structures to determine the impact of these important new rules and consider modifications to potentially improve their tax efficiency.

For more information, please see our BMO publication entitled “Tax Proposals Affecting Private Corporations:“Income Sprinkling” Draft Legislation Revised”, and consult with your external tax advisor to understand the appropriate planning considerations in your particular circumstances.

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