As the year comes to a close, you may be surprised to learn that there are still a number of steps you can take to minimize your taxes before year-end. Before January 1st comes knocking on your door, here are 12 steps that bear repeating to reduce your tax bill come April.

  1. Ensure you make your charitable donations before December 31 to be eligible for a receipt in 2014. To encourage giving, Quebec has an additional credit of 25% on donations between $5,000 and $25,000 made to a cultural organization as well as an additional “cultural patronage” credit for large donations of at least $250,000. Lastly, don’t forget the Federal first-time donor’s super credit of an additional 25% of non-refundable federal tax credit that applies to the first $1,000 of donations where you or your spouse haven’t claimed a donation tax credit in any year after 2007.
  2.  If you have investments with accrued capital gains and have some favourite charities, consider making a donation of securities and benefit from a tax-free gain and the donation tax credit.
  3.  There are a number of expenses that should be paid before year end in order to be eligible for a deduction or credit for the current year. These include medical expenses, child care expenses, child fitness and arts expenses, investment counsel fees and other carrying charges as well as political contributions. Remember that the Federal Children Fitness credit amount increases from $500 to $1,000 per child in 2014.
  4.  Consider realizing capital losses to offset capital gains realized earlier in the year or to carry back and offset against capital gains realized in the prior three years.
  5.  If you are considering withdrawing funds from your tax-free savings account (TFSA) to pay your holiday season bills, it is better to withdraw before December 31, as amounts withdrawn can be contributed back to the plan in the following calendar year.
  6.  Contributions to registered education savings plans (RESP) should be made before December 31 to be eligible for the 20% Federal grant (and additional 10% grant in Quebec).
  7.  Although the deadline for contributing to a registered retirement savings plan (RRSP) is March 2, 2015, contributions should be made as early as possible to get the benefit of tax-free compounding for a longer period. In Ontario if you have additional RRSP contribution room consider topping it up to reduce the impact of the higher tax rates applicable on individuals with taxable income of greater than $150,000 in 2014.
  8.  When purchasing pooled funds or mutual funds outside of a registered plan, ensure that the purchase is made after the record date for the year-end distributions as many funds will make a taxable distribution sometime in December.
  9.  If you turned 71 this year, you must convert any RRSPs to RRIFs or annuities before the end of the year. If you have earned income in 2014 allowing you to make a contribution in 2015, consider making the contribution in December before converting the plan, pay the 1% over contribution penalty if requested, and get the full deduction for 2015.
  10.  Some individuals purchase mineral flow-through shares to benefit from the deductions that such shares provide. The purchase of these shares must be made before December 31 to benefit from the deductions in 2014.
  11.  If there is a wide disparity in spousal incomes and assets consider a spousal loan before the end of the year. The prescribed rate for such a loan is 1%, until March 31, 2015.
  12.  This is an excellent time to review the types of investments that you hold, i.e., stocks and bonds, and the accounts in which they are held.  As Canadian dividends and capital gains are taxed more favourably than interest, it is preferable from a tax standpoint to hold equities in a non-registered account.

While the list is broad, it is by no means inclusive. Should you have any questions about your specific situation please feel free to contact your Financial Advisor.