(NC)—As the year draws to a close, now is the best time for Canadians to turn their attention to tax planning strategies to round out 2010. According to Carol Bezaire, vice-president, tax and estate planning at Mackenzie Investments, Canadians may want to consider some of the following steps to reduce tax bills:
1. Review your finances to identify potential tax credits. Tuition fees, medical expenses, childcare bills, child support, and tax-deductible legal fees may all be eligible. Most purchases that qualify for tax credits or deductions must be made before December 31, 2010 to qualify as part of the 2010 tax year, so be sure to get these payments made before the deadline.
2. Review your portfolio and consider selling stocks that have fallen below their purchase price. This can reduce your tax bill by triggering a capital loss, offsetting any capital gains you’ve had in 2010. If you are already carrying losses from previous years and want to free up some cash, speak to your advisor about crystallizing some of your gains as well. You can offset the gains with losses and reduce or eliminate your capital gains tax.
3. Make a Spousal RRSP contribution by year-end. If you contribute to a Spousal RRSP, the contributor will be taxed on any withdrawals made in the current year and the next two years. Contribute by December 31 to shorten the waiting period. Contributions made in 2010 can be used by the lower-income spouse beginning in January 2013.
4. If your job affords you the option to roll your before-tax, year-end bonus into an RRSP – take advantage of the opportunity. Rolling your full, before-tax bonus into an RRSP, allows you to take advantage of compound interest on the full value of your bonus – which will significantly increase the value of your investment over time.
5. Make a charitable donation. Taxpayers have until December 31, 2010 to make a donation and get a receipt. In today’s online world this is easier than ever as receipts can be processed and emailed almost immediately.
There may be more you can do to cut your tax bill and fine-tune your finances. The best advice is to speak to your financial advisor about your tax and financial strategy.
More information can be found online at www.mackenziefinancial.com