Personal Finance | Ten things to do between now and the end of the year to pay less taxes

We can take several actions between now and December 31 to ensure that we pay less taxes in 2024. The month of December is rarely the month when we want to look at columns of figures; why not take advantage of November to delve into your finances? Here are 10 tips that might be helpful to you.

1. If you are eligible, contribute to CELIAPP

Reducing your taxable income is one of the most effective strategies to implement to pay less taxes next year.

You can obviously do this with contributions to a registered retirement savings plan (RRSP), but there’s no rush, since you have until 1^is March 2025 for this.

Please note: this is not the case for contributions to the tax-free savings account for the purchase of a first property (CELIAPP), which must absolutely be made by December 31. If you are eligible, you can contribute up to $8,000 per year, plus any amount carried over from the previous year (for a maximum of $16,000 per year). This amount will be deducted from your taxable income.

You can take advantage of this to make your RRSP contributions at the same time, in particular to invest the money sooner rather than later. “But in terms of taxation, there is no difference between making an RRSP contribution on December 29 or January 2,” underlines Charles Rioux Rousseau, financial planner and practice development and quality advisor at the Planning Institute. financial.

2. RRSP withdrawals: wait

If you plan to withdraw money from an RRSP to buy your first property or to return to school, try to wait until January to do so. The start of the period during which you will have to repay this money will be postponed by one year.

Since these are often large amounts (the Home Buyers’ Plan, or HBP, now allows withdrawals of up to $60,000), this can have a considerable impact.

3. TFSA withdrawals: don’t wait

For withdrawals from a tax-free savings account (TFSA), it’s the opposite. If you had planned to withdraw money from a TFSA at the beginning of 2024, it may be interesting to withdraw this amount before the end of 2023 instead.

This way, you will be able to recover your TFSA contribution room from 2024, so you will not have to wait until 2025 to put money back.

4. Make the expenses for the credits and deductions you want to benefit from

Several types of expenses are eligible for tax credits, for example renovations to make housing accessible to seniors.

If you plan to make some of these expenses in the coming months, try to do them by the end of the year if possible. The money will return to your pocket faster than if you have to wait another year to get it back.

Moreover, this is a good time to browse the lists of tax credits that individuals can benefit from both provincially and federally. You might have a nice surprise.

Consult the tax credits for citizens – Quebec

View tax credits and benefits for individuals – Canada

This is the same principle for costs that can be deducted from your taxable income, for example those related to eligible work for owners of income properties.

5. Make your RESP contributions, especially if it involves a teenager

The Registered Education Savings Plan (RESP) provides access to significant government grants to help a child finance their post-secondary education.

The subsidies are calculated on the money paid during the year, so if you contribute by the end of the year, you will receive the government money sooner, and it will be able to grow without risk. tax longer.

The December 31 deadline is particularly important if the child turned 15 this year and is not yet the beneficiary of an RESP. If this is the case, to be able to benefit from the program, you would have to pay a contribution of at least $2,000 into such an account in your name by the end of the year, which will allow you to receive subsidies for the current year and also have access to it in 2025 and 2026.

Furthermore, if the young person will turn 17 in less than seven years, this is the best time to make significant contributions to the RESP to obtain as many grants as possible while there is still time. A maximum of $5,000 per year is eligible for grants ($2,500 per year plus $2,500 in accrued rights if this is the case). The capital can be recovered by the subscriber.

6. Consolidate your donations

The tax credit for charitable donations becomes more generous when you pass the $200 mark. At the federal level, it is 15% for the first $200 and 29% or 33% for the rest (depending on the case). Provincially, it is 20% for the first $200 and 24% or 25.75% for the rest (depending on the case).

It is therefore in your best interest to group your donations together to declare them.

For example, if you have donated $150 so far and you plan to make other donations in the coming months, try to make them before the end of the year to exceed the $200 threshold.

It is also possible to group your donations with those of your spouse, or with those of the last five years if these have not been declared.

For larger contributions, be aware that donating securities to a charity can be beneficial. Not only will you have a charitable donation receipt corresponding to the market value of the securities, but the capital gain will not be taxed.

7. Consolidate your medical expenses

Medical expenses are eligible for a tax credit only above a certain amount, which must be accumulated over a 12-month period ending during the calendar year concerned. At the federal level, these are amounts that exceed 3% of the individual’s net income or $2,635, whichever is less. At the provincial level, these are those who exceed 3% of net family income.

If you have expenses of this magnitude, try to keep them within the same 12-month period if possible.

For example, if you have already paid $2,000 for braces and you need to make another payment of $2,000, try to make it within the period. And while you’re over the threshold, see if you have other eligible expenses that you could incur at the same time.

Obviously, this advice is less easy to follow than others, given that we do not always have control over when medical expenses arise. “Generally, people who have significant medical expenses have them all year round. But be orderly in the way you archive medical expenses, because for someone preparing a tax return, it can be quite a mess,” underlines Charles Rioux Rousseau.

8. Capital losses and gains: establish your strategy

At the end of the year, your capital losses are used to reduce your capital gains, which lowers the taxable amount.

If you have had significant capital gains this year and want to sell assets that have declined in value to offset those gains, the sale must be made no later than December 30, 2024.

Don’t forget to pay attention to the exchange rate: if, for example, you purchased shares of a US company when the US dollar was at par with the Canadian dollar, and the stock lost value, you may feel like you have made a capital loss, when applying the current exchange rate, it could be a capital gain for Canadian tax purposes.

Losses can be used to offset gains from the previous three years or any subsequent year.

Speaking of capital gains, should you take into account the increase in the inclusion rate announced by governments in your strategy? This concerns gains made after June 25, 2024, but has not yet been legislatively adopted.

“When it is announced in the budget, even if the text of the law is not written and it is not official, we act as if it were in force, it is a sort of relationship of trust between the tax community and the government,” explains Charles Rioux Rousseau.

The instability currently reigning in the House of Commons has led some to believe that this amendment will fall through. We therefore remain “in the dark” regarding this measure, admits the financial planner.

In any case, the date of June 25 has passed; impossible to go back in time to realize your capital gains before this one. If the fact that the inclusion rate increases or not changes the situation a lot in your case, you can choose to wait until things become clearer before moving your pawns. “Of course, if you have capital gains and you’re in no hurry to sell your stuff, why rush? But depending on the situation, it’s a good discussion to have with your financial planner. And we must not wait between Christmas and New Year’s Day, we must call it there, from the beginning of November,” underlines Charles Rioux Rousseau.

9. Convert your RRIF into an RRSP to avoid the minimum withdrawal

If you are under age 71 and have an open RRIF, you can convert it back to an RRSP by the end of the year to avoid having to make the applicable minimum withdrawal next year.

“Sometimes people are surprised to see how high the minimum withdrawal is. If they have started to work a little again or if they anticipate a good capital gain, adding the minimum RRIF withdrawal can generate too much taxable income,” underlines Charles Rioux Rousseau.

That said, as retirees aged 65 and over benefit from age-related tax credits, we must be careful not to, for example, live solely on TFSA or unregistered account withdrawals without declaring any taxable income at all. and saving RRSPs for later.

“For most retirees, ensuring that they have a taxable income of around $25,000 per year is optimal,” says Charles Rioux Rousseau. It varies from person to person, but there’s still time to consider your strategy between now and December 31.

10. If you turned 71 this year…

This point specifically concerns people who turned 71 in 2024. You have until December 31 to contribute to your RRSP before it must be converted to a registered retirement income fund (RRIF) or a registered annuity. Please note, you do not benefit from the 60-day extension like the rest of the population!

Please note, however, that you can continue to contribute to your spouse’s RRSP if he or she is 71 years old or younger in the year the contributions are made.

If you are one of the few people aged 71 who worked in 2024 and who wish to use the accumulated rights to contribute to their RRSP, know that there is a way to make an excess contribution in December in anticipation of 2025. However, it involves a small penalty: talk to a professional if you are in this situation.