2018 Year End Tax Tips

As we move towards the holiday season now is a good time to review your finances and take advantage of tax planning ideas to reduce your taxes for 2018. The following are some ideas that are worth considering: Incorporated Business Owners: You can no longer pay family members who are shareholders a dividend without justifying their work or capital contribution to your business. Setup a pension plan to create an extra tax deduction from your corporation. Contribute more than an RRSP. Real Estate Investors: This is a big audit area for the CRA - make sure you keep all of your receipts and documents. If you purchased a pre-construction return property you can claim the HST new rental housing rebate. Personal Taxes:

1. Make RRSP contributions if you are in a high tax bracket. The RRSP contribution deadline is March 1 2019 - however the earlier you make the contribution the more tax deferred growth you can have.

2. If you make regular monthly RRSP contributions through the year you can complete form T1213 to get a tax refund on every paycheque instead of waiting until the end of the year.

3. Delay RRSP withdrawal under the Home Buyer's Plan or Life Long Learning until 2019 so that you can delay repayment by 1 year.

4. Convert your RRSP into a RRIF by age 71. It may be advantageous to make an over contribution in the year you turn 71 so that you can deduct the contribution in 2019 assuming you will have income. If you spouse is younger than age 71 you can still contribute into a spousal RRSP.

5. Make TFSA contributions to shelter investment income from taxes. If you have not yet opened a TFSA and have been over age 18 since 2009 you can contribute a catch-up amount of up to $55,500. You will have an additional contribution room of $6,000 as of January 1 2019. You can invest in stocks, mutual funds, GICs and saving accounts.

6. As a reminder effective January 1 2017, switches from corporate class mutual funds in a non registered account will result in a taxable event.

7. Utilize tax loss selling to use investment loses incurred during the year to offset current year capital gains and/or gains from the past 3 years. To recognize the loss in 2018 your trade date must be on or before December 27 2018. Watch out for investments purchased in a foreign currency as your anticipated loss may be actually a gain. Also beware of superficial loss rules that apply when you sell an investment for a loss and buy it back within 30 days.

8. Use a prescribed rate loan to split investment income with a spouse or child at a lower tax bracket. The currently prescribed interest rate is 2% and this rate is locked in for the duration of the loan. You must remember to pay the interest for each calendar year by January 30 of the following year.

9. If you do not have any income and can claim the basic personal amount you can receive about $51,800 of eligible dividends without paying any federal taxes.

10. Make RESP contributions to help fund your child's education and receive free money from the government. The basic grant is 20% of your contribution up to a lifetime total of $7,200.

11. The home accessibility tax credit can help seniors and people with disabilities. The tax credit is equal to 15% of up to $10,000 worth of renovations

12. Contribute to an RDSP - this is for people who qualify for the disability tax credit. The government gives generous grants for every dollar you contribute.

13. Charitable donations can also be done through kind in transfers of your investments or naming a charity on as a beneficiary to your life insurance policy.

14. A tax credit can be claimed if total medical expenses for your family exceeds the lower of 3% of your net income or $2,302. If your medical expenses will be less than this threshold consider prepaying on certain medical expenses.

15. If you sell your house in 2018 you will need to file the principal residence exemption form with your tax return.

16. There is an Ontario land transfer tax rebate for first time home buyers (up from $2,000 to $4,000). This means that there will not be any land transfer taxes for a home purchase less than $368,000. On the flip side anyone who buys a home with a price of $2 million dollars or greater will need to pay 0.5% more in land transfer taxes on the portion in excess of $2 million dollars. 17. If you need to care for a family member you might be eligible to claim the Canada Caregiver amount. 18. If you have eligible pension income you can split up to 50% with your spouse to save on taxes. You can also claim the $2,000 pension tax credit. 19. If you own foreign property including cash and investments (including US stocks) with a cost of more than $100,000 Canadian you must file form T1135 with your tax return. Failure to do so will result in a penalty of up to $2500.

I hope that the above can save you some money. Financial planning is a year round affair. Make sure you re-visit your financial plan on a regular basis.