How are You Avoiding the Tax Grinch before Christmas?

November 29, 2018

Be Tax Smart

Having a financial advisor that is aware of tax implications within your wealth management plan can lead to significant savings throughout your life. You can never truly avoid the income taxes you owe on an annual basis, but you can definitely make smart choices and employ tax credit options to lessen the burden of taxes annually. Some of your options require you to take action before the end of the year. Here are some great ways to manage your tax bill more efficiently this year in relation to your investment portfolio.

Managing When to Convert Your RRSP to an RRIF

For those investors turning 71 before the end of the year, you have no other choice but to convert your RRSP to an RRIF if you have not already done so. During that process, there are regulations around how much you must withdraw from an RRIF annually which will have income tax implications, as it is considered income.

However, if you are between 65 and 71, you may want to consider converting your RRSP to an RRIF early, especially if you have had lower income years and you want to maximize your income tax savings. By withdrawing extra from an RRIF in lower income years, it can help smooth out your taxes payable. The extra income, if not needed, can still be invested in a non-registered investment vehicle to keep increasing your portfolio value.

Rebalance Your Portfolio

In volatile markets, as has happened this fall, it might be a good time to consider rebalancing your portfolio and selling equities or positions that you may already be taking a loss on. This is considered ‘tax-loss selling’ whereby you get to claim the loss against your income taxes of the previous three years, while also maximizing your portfolio to take advantage of other opportunities. Be sure to ask your advisor first to avoid selling potential winners in the long-run.

Making Charitable or Political Donations

Tax-gain donating allows you to donate securities ‘in-kind’ to the registered charity of your choice allowing you to expense the fair market value of the security without having to pay the capital gains tax associated with the disbursement of the investment. Of course, you can also make one-time donations to charities and political parties to receive tax credits as well.

Managing Capital Needs Smartly

You many need to withdraw a large sum of money from your Tax Free Savings Account (TFSA) in the next 12 to 18 months. If so, you might consider withdrawing it before the new year, as it would allow you to put an equal investment back into the TFSA after the New Year, instead of having to wait for another 12 months.

Getting the Most of RESP Grants

It’s a rare opportunity when you get grant money from the government so be sure to maximize contributions for your RESP accounts for your children’s education to ensure you receive the full grant value allowed annually.

Don’t Put Off that Medical Procedure

You can claim the lesser of $2,268 or three per cent of your annual income. So if you have not had any major medical expenses this year, but are considering a major expense, it would be financially-wise to do it before the New Year to maximize the tax credit this year, opening up the possibility for medical expenses next year as well.

Investing tax-smart is something that your financial planner or Investment Advisor should be offering you. Ask about these options with your advisor today.

Feel free to contact Steve McBride, Investment Advisor, Echelon Wealth Partners regarding any questions you may have on this content.



This blog is solely the work of Steve McBride for the private information of his clients. Although this author is a registered Investment Advisor with Echelon Wealth Partners Inc. (“Echelon”) this is not an official publication of Echelon, and this author is not an Echelon research analyst. The views (including any recommendations) expressed in this newsletter are those of this author alone, and they have not been approved by, and are not necessarily those of, Echelon.

Echelon Wealth Partners Inc. is a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund.

Forward-looking statements are based on current expectations, estimates, forecasts and projections based on beliefs and assumptions made by authors. These statements involve risks and uncertainties and are not guarantees of future performance or results and no assurance can be given that these estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements.

The opinions expressed in this report are the opinions of this author and readers should not assume they reflect the opinions or recommendations of Echelon Wealth Partners Inc. or its affiliates. Assumptions, opinions and estimates constitute this author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results.

These estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements. Echelon Wealth Partners Inc., its divisions, subsidiaries, and affiliates, do not provide any income tax advice and does not supervise or review any income tax returns. Please consult your accountant.