Year-End Tax Planning

Year-End Tax Planning

 
Although the tax season doesn’t end until April of next year, now is the time for you to do any last minute, year-end tax planning. With one month left in 2020, you still have time to take advantage of these helpful tax-tips.
 
Last Trading Date
For all of our investors, you should mark December 29th on your calendar as the last trading date of 2020. While you can continue to trade beyond the 29th, any US or Canadian publicly traded stocks sold or purchased after this date will be settled in the new year due to processing time, which typically takes two business days. This means if you make a trade on December 30th 2020, any capital losses or gains made from that trade will be applied to your 2021 tax year instead of this year.
 
Also remember that Canadian stock exchanges are closed on both Christmas and Boxing Day, unlike US exchanges which are only closed for Christmas.
 
Charitable Donations
As we enter the giving-season, it’s a fantastic time to donate to a meaningful cause. Charitable donations can also create significant tax deductions. To maximize your tax benefits, consider donating publicly listed securities that have accrued a capital gain this year. Donors of these securities will pay no tax on capital gains and will receive a tax receipt for the fair market value of the security. This is the gift that keeps giving!
 
TFSA Contributions
All Canadians over the age of 18 can (and should) open a Tax Free Savings Account (TFSA). The annual contribution limit for 2020 is $6,000, so don’t forget to make your contribution before the year is through!
 
Making Your RESP Contribution
There is no better investment than in your child’s education. With the new year quickly approaching, don’t forget to contribute to their Registered Education Savings Plan (RESP) before the annual deadline on December 31st. While this contribution is not tax-deductible, it can grow tax-free within the plan and is one of the most cost-efficient ways you can save for your child’s post-secondary education. Not to mention, when the funds are removed for your child, they will be taxed minimally or not at all as a student.
 
Don’t forget, the government will match the first $2,500 of your yearly contributions up to 20% until your child turns 15!
 
COVID-19 Government Benefits
This year, due to the pandemic, there are a few extra tax considerations for those who have received COVID-19 government benefits, or for those who might want to consider applying while they can.
 
Claiming CERB Retroactively
If you are eligible, this Wednesday, December 2nd, is your last chance to retroactively claim the Canada Emergency Response Benefit (CERB). CERB was available until September 26th to individuals who, as a result of the COVID-19 Pandemic, were unable to earn an income, or to those whose working hours were reduced and therefore earned $1,000 or less in employment income in a four-week period.
 
Calculating Tax on CERB for Next Year
If you did apply and receive CERB this year, keep in mind that these cheques have not yet had tax deducted from them. The government will be issuing T4A tax reporting slips for all 2020 CERB recipients and you will need to claim how much money you received. While these taxes won’t be filed until spring, now is a great time to calculate your total yearly income from all sources and consider setting aside funds you will owe for CERB next April.
 
 
 
As we head towards the new year, make sure you’re starting 2021 on the right financial foot! If you’re feeling overwhelmed, now might be the perfect time to book one final meeting in 2020 with your Wealth Investment Advisor.