The end of year sprint begins. Even though your tax return isn’t due until the spring, there are several things to think about before December 31 if you want to save money. So, between the files to be completed at work, the parties Christmas to organize and gifts to buy, don’t forget to find some time for your taxes. Here is a little guide to help you.
Medical expenses
Need a trip to the orthodontist, ophthalmologist or physiotherapist? If you hurry to make an appointment before the end of the year, you could count these eligible expenses towards the tax credit for medical expenses and maximize the benefits.
“To have access to this tax credit, basically, the total costs must exceed 3% of the net income of individuals,” underlines Vincent Fortier, senior director of taxation at Raymond Chabot Grant Thornton.
For example, if your net income is $50,000, you will need to accumulate expenses of at least $1,500 this year to benefit from it. If you haven’t quite reached that amount yet, but have other expenses planned for January, it might be a good idea to move them forward.
Please note: the amounts must have been disbursed over a period of 12 months, which does not necessarily end in December. “But people tend to use the calendar year,” says Fortier.
The expert also recalls that it is necessary to group together the expenses of the entire family, those for spouses and dependent children. “And we must ensure that these expenses have not already been covered by insurance,” adds Mr. Fortier. If the costs have only been partially reimbursed, the unreimbursed portion may be counted.
Also check that your expenses are properly recognized. The tax credit for medical expenses is available at the federal and provincial levels, but the two levels of government do not have quite the same list of eligible expenses. For example, fees paid for a naturopath or an osteopath are recognized by Quebec, but not by Ottawa.
Charitable donations
Thinking about donating to charity? Rather than giving a little this year and a little next year, “you would be wise to accumulate your donations in a single year to get the most out of them,” says Mr. Fortier.
As a reminder, when you add the federal rate and the provincial rate, you are entitled to a 35% credit for the first $200 of donations. For each additional dollar, the credit increases to 53%.
Let’s take an example. You gave $200 in donations this year, and you plan to do the same next year. If you do this, your tax credit will be $70 per year, or $140 in total.
Now suppose you spend the same amount on donations, that is, $400, but in a single year rather than two years. In this case, your credit will be $176. The benefit you get is therefore higher.
Please note: unlike medical expenses, the calculation period is not flexible. You have until December 31.
CELIAPP
For those who aspire to buy a house one day, there is the famous tax-free savings account for the purchase of a first property (CELIAPP).
As in the case of the registered retirement savings plan (RRSP), the amounts you deposit in these accounts are subtracted from your taxable income. So your income drops, and you are taxed less.
But be careful: the contribution period is not the same for these two plans. In the case of the RRSP, you can still invest money during the 60 days following the end of the tax year. In the case of CELIAPP, you must do it before December 31. Otherwise, after this date, your contributions will be recorded in your tax return for the following year.
“Also, even if we don’t have the money to contribute this year, it’s still important to open an account to have access to the annual contribution right of $8,000, which will accumulate for the following year “, says Mr. Fortier.
Another reminder, if you are a student – your income is therefore probably low, and your tax level too – you are not obliged to deduct your contribution from your taxable income in the same year in which you made this contribution. You could choose to deduct it later, when you have higher income.
RRSP and TFSA
Of course, you still have time to contribute to your RRSP. In fact, you have until 1is next March for this to be taken into account in your 2024 tax return. “But it’s a good practice not to wait until the last minute to look at it and make adjustments,” says Mr. Fortier. Additionally, your accountant or tax professional is probably less busy right now than they will be in the spring if you have questions.
For yourself, you can already consult your last federal assessment notice to find out your contribution rights for this year and take stock of where you are. “Many people have several RRSPs: in their personal account and with the employer. You have to look at everything,” says Mr. Fortier.
On another point, regarding your TFSA, “it is important to remember that if you make a withdrawal during a calendar year, your contribution rights will be reacquired the following year,” adds the expert. In other words, if you have an imminent need for liquidity, consider making a withdrawal from your TFSA — which is tax-free — before December 31, to recover your contribution room on December 1is next January. Above all, be careful, do not withdraw from your RRSP, otherwise the amounts will be added to your taxable income!
Capital gains (and losses)
There was something new this year for the capital gains tax. Until this year, when an individual realized a capital gain (or loss), 50% of the capital gain was taxable, while 50% of the capital loss was deductible from the capital gain. However, since June 25, the capital gains inclusion rate has increased from 50% to 66.7% for the portion of gains that exceed $250,000 for individuals. The rate remains intact for winnings below this amount.
“If you have made a capital gain, for example by selling a building, there are questions that arise. When did you make this gain: before or after June 25? Is your gain more than $250,000? » lists Mr. Fortier.
There are ways to “mitigate your gain” if you have capital losses to realize, adds the expert. “But in this case, it is preferable to go see a specialist who will be able to tell you the best strategy to follow,” explains Mr. Fortier.
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