Time’s running out for tax savings in 2016

Tax planning may not be the most exciting thing to think about amidst the bustle of your December merry-making, but it’s the perfect time to take care of any last-minute tax items. Especially since some of these opportunities won’t exist after 2016! Wrap up your year with these last-minute – and, in some cases, last chance – tax-saving strategies.

RRSPs and TFSAs

If you haven’t made your 2016 RRSP contribution yet, the deadline is March 1, 2017. If you have an RRSP and you turn 71 in 2016, you must convert your account to a RRIF before the end of this year. Next year, you will have to start withdrawing funds from your RRIF based on the prescribed minimum payments. If you have RRSP room in 2016, make your contribution before you convert your account to a RRIF. If you’ve turned 72 years old, you can still make a spousal RRSP contribution as long as you have the room and your spouse is under the age of 72.

In addition, if you haven’t maximized your TFSA contribution this year, or in any other year, you can contribute a maximum of $46,500 if you have never contributed before.

Realize capital losses

Although stock markets have rebounded lately, you may still have some investments that have an unrealized loss this year. If you’d like to realize these losses so that you can use them against capital gains from other investments this year, the sale must settle in 2016. The last day to make a trade that will settle in 2016 is December 23.

Donations

Some people choose to donate to charity on a regular basis during the year. Others decide in December which charities to give to. If you haven’t made all of your donations yet, you have until December 31 to donate in order to claim them on your 2016 tax return. If you have any investments such as stocks or mutual funds that have gone up in value, consider donating them instead of cash. Not only will you benefit from the donation tax credit, but you will also not have to pay tax on the capital gain.

Medical Expenses

You can only claim medical expenses paid in 2016 on your 2016 tax return. So if you have some outstanding bills from the dentist and won’t have enough expenses to claim next year, make sure to pay your bill by the end of the year.

Corporate Class funds

Starting in 2017, owners of corporate class mutual funds will not be able to switch money between the funds without tax consequences. So if this is the only reason why you own a particular fund, you might want to sell it before the end of the year.

Children’s fitness and arts credits

2016 is also the last year that you can claim the children’s fitness and arts credits. If you haven’t spent the limit for either of these credits ($250 for arts and $500 for fitness), you may want to prepay the cost of your children’s 2017 programs now.

Ontario Healthy Homes tax credit

The Ontario government has also announced that it will be eliminating the Ontario Healthy Homes Tax Credit in 2017. So, if you are 65 or older, or living with a family member who is a senior citizen, now is your last chance to take advantage of this tax credit. If you were planning on putting grab bars in your washroom or installing locks that are easy to operate, don’t wait until 2017 to claim a maximum of $10,000 for these types of expenses.

To ensure you’re not missing out on any other year-end tax saving strategies that you qualify for, speak to your financial planner.

Marcy Ages is a passionate, detail-driven provider of financial planning services, including investment management and tax preparation. As founder of The Care Network, Marcy also works with other service professionals to support high-net-worth individuals with their estate planning and assisted living issues.

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