End of Year Reminders and Strategies

Several routine financial planning items must be completed by December 31. For example, make any charitable donations that you wish to report on this year’s tax return. Contribute to a Registered Education Savings Plan (RESP) to trigger the annual Canada Education Savings Grant (CESG). If you turn 71 this year, you have until December 31 to make your final Registered Retirement Savings Plan (RRSP) contribution and terminate the plan.

Some situations, however, call for less-routine measures that must also be performed by year-end.

Making a TFSA withdrawal. If you plan on making a Tax-Free Savings Account (TFSA) withdrawal in the near future, doing so by December 31 enables you to regain the contribution room on January 1, 2020. But if you wait until the new year to make the withdrawal, you can’t replenish the funds until 2021.

Triggering a capital loss. If you no longer wish to hold a non-registered investment whose value has decreased since its purchase, you could sell the investment to trigger a capital loss. The loss can offset taxable capital gains you realized in 2019, and
any excess loss can be carried back three years or carried forward indefinitely.

Topping up to bracket. This strategy primarily suits retirees with funds in an RRSP or Registered Retirement Income Fund (RRIF) that would eventually be taxed at the highest marginal rate when payable by the estate. You withdraw an amount by December 31 that increases your annual income to the upper limit of your current tax bracket, resulting in reduced tax over the long term.

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