While we will have two months left, the holiday season will soon be here and nobody other than accountants and financial planners want to talk about stocks or RRSPs. Taking care of a few things before December 31st could save you some money, so here are four items to think about before the end of the year.
Your stocks
If you’ve sold shares of companies or mutual funds outside a registered account, you’ll have a capital gain or capital loss that will impact your taxes. If you’re looking at a large gain, you may want to consider unloading stocks from a company where the value went down.
The key is to make the transactions during the same calendar year. Let’s say you owe $10,000 in tax from selling some shares in Tesla. If you wait until January to sell off some stock in Bombardier that’s plummeted, you won’t see the benefit of that until 2021!
Of course, you don’t want to sell for the sake of selling, it should be a stock you were already planning on letting go of.
RRSP Contributions
This year, the deadline for RRSP contributions is February 29th. Most financial planners will suggest that you make regular contributions throughout the year to avoid the crush at the end of February. For one thing, they are already bombarded with people who haven’t planned ahead. One reason you may not have considered: the number of contributions close to the deadline causes a slight bump in share price around February 28th which means you end up with a slightly worse investment if you end up dumping the money on the deadline.
Stock markets are supply and demand and if there’s a big demand, prices will go up. It’s not usually significant, but why not make as much money as you can?
Donations – Charitable and Otherwise
If you are considering making a donation to charity, you’ll have to do it by December 31st for the donation to qualify for this tax year.
We find a lot of people make contributions or donations to political parties, so make sure you have the receipts. You can’t claim donations to municipal candidates on your tax return, but the benefit for donation to a federal candidate is huge:
- 75% of the first $400 you donate,
- 50% up to $750, and
- Just over 33% of everything over that.
With the federal election behind us, most people have already made a contribution if they’re going to, but you still have time.
Medical expenses
You can claim medical expenses if they are more than 3% of your net income for the year. The question I ask clients is “Is it significant?” A small recurring prescription wouldn’t qualify, but if you’re spending 5% to 10% of your income on medical expenses, you can claim it on your tax return.
Sometimes you may have elective medical expenses such as new glasses or braces for the kids. By elective, I mean something that’s not an emergency. If the glasses and braces come in the same 12 month period (doesn’t have to be a calendar year), you can stack them and claim both of them. The more you can cram into a year, the better.
Most people cannot claim cosmetic procedures, but a minority can based on the nature of the business. If you think you fall into this category give us a call.