Have a tax-smart finish to 2011
The year may be almost over, but there might still be time to find ways to save on your 2011 taxes—and adopt some tax-smart habits for the coming year and beyond.
Income splitting: If you are 65 or older, you might be able to allocate up to one-half of qualified pension income to your spouse or common-law partner. Pension income can come from pension plans, registered retirement income fund (RRIF) payments or certain annuities.
Accrued losses before year-end: If your investment objectives or the underlying fundamentals of an investment have changed, you might want to consider selling the investment, which can trigger a capital loss and offset any capital gains you may have had, thereby reducing your overall tax bill.
RRSP contribution: The deadline is not until early 2012, but consider making your 2011 registered retirement savings plan (RRSP) contribution now if you haven’t already done so. By acting sooner rather than later, you can give the investments in your RRSP more time to potentially grow through compounding.
RESP contribution: Remember that you must put money into a registered education savings plan before year-end to qualify for the 2011 Canada Education Savings Grant.
TFSA contribution: Don’t forget about the tax-free savings account. Canadians 18 and older can put $5,000 per year into a TFSA and benefit from tax-free growth on eligible investments held in the account.
Charitable contributions: To qualify for many credits and deductions, including charitable contributions, you must complete these transactions before December 31.
Speak with your financial adviser for more information on year-end strategies. Best wishes for a happy and healthy holiday season.
Leahy is a financial adviser with Edward Jones, specializing in assisting seniors.