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Taxation - Things to consider and review before December 31, 2015
12-16-2015
1. Calculate your expected total income for 2014. If you have a low income and, depending on your age, if you are retired and have low income, it may be worthwhile to deregister some funds now before you convert your account into a RIF. If you do already have a RIF you can always deregister additional funds as well. Be aware that when you deregister additional funds from an RSP or RIF there is a withholding tax taken at the time of the withdrawal.
2. If you turned 71 in 2014, make sure that you have moved your RRSP into a RIF. If you have taxable earned income it may make sense to make a final contribution to your RSP. Again, it only makes sense if you have earned income to deduct the contribution from.
3. Be sure to take advantage of all income-splitting and pension-sharing opportunities. Taxpayers can apply to share their Canada Pension Plan (CPP) retirement income with their partners if both are 60 or over. While pension sharing is not considered to be the same as pension income splitting, CPP pension sharing accomplishes much the same thing — putting more income into the hands of the lower-income partner. You can find out more about CPP retirement pension sharing here. The post-retirement CPP benefit, which was introduced in the 2012 tax year, is not eligible for pension sharing.
4.Don't assume that you don’t need to bother filing a tax return because you have no income.
Some low- or zero-income earners still think there's no need to file a return. This misunderstanding can cost thousands of dollars in lost benefits and credits like the GST/HST credit and the Canada Child Tax Benefit. More and more benefits are being distributed through the tax system these days. So, if no return is filed, no benefits get sent.
For some benefits, like the Guaranteed Income Supplement and the Working Income Tax Benefit, recipients need to apply every year.
Provinces also offer sales tax credits and property tax credits for low income earners. But again — no tax return, no credit.
Teenagers who earn a few thousand dollars should also consider filing. That creates RRSP room that can be carried forward indefinitely to use at a time when they will owe tax.
5.Be sure to report all T-slips.
Here's a possible scenario: You file your return and later discover that you've failed to include a T-slip reporting income or a dividend payment. No problem, you think, because you know the slip’s issuer also sends the same information to the Canada Revenue Agency. You think you don't need to bother forwarding this late slip to the tax department because the CRA will know about it.
6.Give to a charity or your family.
Give to others. Charitable donations are an effective way to reduce your taxable income when you itemize on your tax returns. If you’ve been meaning to make a donation and want to lower your tax bill for 2015, be sure to make your contributions by December 31. Now is also a good time to clean out a closet or basement and donate clothing and household goods. Remember to get receipts for non-cash donations.
Give to family members. You are able to give up to $14,000 a year to as many individuals as you choose without paying gift taxes, which helps reduce the amount of your estate. You can give cash, stocks, bonds, and portions of real estate. You must do this by December 31. Get ideas for family gifting. Read Viewpoints
7.Bundle your tax write-offs.
One way to maximize the value of tax deductions is to bunch two years’ worth of itemized deductions into a single year, especially if you expect your income to be higher. For example, if you have unreimbursed work expenses that you incurred early in the year, you might be able to pull next year’s expenses into this year and double up your 2015 deduction.
Consider making an extra mortgage payment or prepay taxes (state and real estate) to allow additional deductions.
8.See if you may be able to put any losses to work.
Tax-loss harvesting might sound complicated, but the principle is pretty simple. Offset your realized taxable gains on your investments (capital gains) with losses (capital losses). That means selling stocks, bonds, and mutual funds that have lost value to help reduce taxes on gains from winning investments. (Of course, you don’t want to undermine your long-term investing goals by selling an investment just for tax purposes.) Tax-loss harvesting needs to be done by December 31. For more
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