OTTAWA — You may be reluctant to add one more item to an already daunting holiday to-do list, but financial experts want to make sure your financial plan doesn’t get neglected in the year-end rush as 2019 comes to a close.
Mike Laughton, a financial planner at RBC, says the mistake many Canadians make is that they don’t think about their taxes until April and by that time it is too late to take advantage of the many opportunities available to reduce what they must pay.
“Doing a little year-end housekeeping to get your financial house in order is exactly the way to do it,” he says.
To maximize your deductions, Laughton says, there are certain charges that need to be incurred by the end of the year in order to be eligible to claim on your 2019 tax return.
“The most obvious one would be charitable donations,” he said.
“There are also medical expenses as well. People that are eligible for the disability tax credit for instance can deduct medical expenses, including renovations to their house, but they have to be incurred before the end of this year.”
It isn’t just your taxes that go by the calendar year.
The calendar year is also used when calculating the government grant for your registered education savings plans and registered disability savings plans. If you don’t max out the available government contribution by the end of the year, it can carry over to the next year, but Laughton says there are limits to how much.
“In both cases the government is going to give you free money,” he said. “Depending on how much you put in there are grants, there are bonds, and they are definitely on a Dec. 31 deadline,” he said.
If you turned 71 this year and haven’t converted your RRSP to a RRIF, that must be done by the end of the year. Laughton says withdrawing money from a RRIF or and RRSP can be done strategically to minimize the tax burden.
“If you haven’t otherwise had any income this year, it would be a good opportunity to take money out,” he said.
Laughton also says if you happen to be planning to take money out of your TFSA, it might be a good idea to do it before the end of the year because you’ll be able to put the money back in the new year if you have the cash available.
“If you take money out in January, you’d have to wait a whole year. So, hopefully you don’t have to take it out, but if you do at least you know you can get it back in quicker and easier,” he said.
Katrina McDonald, a certified financial planner at TD Bank, said it is important to meet regularly with your financial adviser to ensure that you are on track with your plan and make sure it is updated with any changes in your life.
She said stock markets have done well this year with the S&P/TSX composite up more than 15 per cent for the year to date, so it might be time to rebalance and ensure your plan is still in line with a comfortable level of risk.
“It’s also been a very good year for the markets in terms of growth,” McDonald said.
She said if you’re hoping to offset any capital gains this year with tax-loss selling, you must be sure to have trades complete by the end of the year. This year that means you have to make you trade no later than Dec. 27, to that it settles by Dec. 31.
McDonald also said if you can be ready for 2020 it will be to your benefit.
As of Jan. 1, you’ll get new contribution room for your tax-free savings account.
McDonald says the sooner your contribution is in your account, whether it is an RESP, TFSA or RRSP, the more time it has to grow.
This report by The Canadian Press was first published Dec. 5, 2019.
Craig Wong, The Canadian Press