As year-end approaches, there’s a key window to strengthen your financial health through targeted tax planning before December 31. At Stone Owl, we see tax planning as a year-round commitment, but this season offers unique opportunities to optimize your strategy. Our expert insights will help you make the most of these final weeks and start 2025 strong!
1. Key moves for investors
Take advantage of these investor-focused strategies to reduce taxes and boost your investment portfolio:
- Tax-Gain Selling: Proposed changes could increase the capital gains inclusion rate to 66.67%, retroactive to June 25, 2024. While not yet law, these changes could impact your tax planning. The CRA is currently unable to assess returns based on these proposals, adding to the uncertainty. Reviewing your investment strategy now might be a good idea. Schedule a call with a Stone Owl tax specialist to discuss strategies tailored to your portfolio and financial goals.
- Tax-Loss Selling: Tax-loss selling involves selling investments in non-registered accounts with accrued losses at year end to offset capital gains realized elsewhere in your portfolio. Any net capital losses that cannot be used currently may either be carried back three years or carried forward indefinitely to offset net capital gains in other years.
- TFSA Withdraws & Contributions: If you are planning a TFSA withdrawal in early 2025, consider withdrawing the funds by December 31, 2024, to avoid having to wait until 2026 to re-contribute that amount. If you have been resident in Canada since 2009, you can contribute up to $95,000 in 2024 if you haven’t previously contributed to a TFSA.
2. Year-end tips for business owners
- Compensation Planning: Assess salary versus dividends to optimize RRSP contribution room.
- Passive Income Management: Manage passive income to retain the small business deduction.
- New Tax Incentives: Explore the Canadian Entrepreneurs’ Incentive for lower capital gains tax on qualifying shares.
- Corporate Planning Initiative for Tax: Explore the exclusive incentive program designed to help small businesses maximize profits and reduce tax liabilities.
“Tough times never last, but tough people do.” – Robert H. Schuller
3. Insights for home buyers and owners
If you’re considering home-related financial moves, here are two opportunities for tax credits:
- First Home Savings Account (FHSA): If you’re saving for your first home, contribute to an FHSA to benefit from tax-free growth up to $8,000 annually.
- Home Renovations: The Home Accessibility Tax Credit and the Multigenerational Home Renovation Tax Credit can help reduce renovation costs. Make payments by December 31 to qualify for 2024.
4. Family planning for students and persons with disabilities
Prepare for education and health-related costs with these tax-efficient strategies:
- RESP Contributions: Secure government grants for post-secondary savings by contributing to an RESP before year-end.
- Registered Disability Savings Plan (RDSP): Contribute to an RDSP to benefit from government grants and bonds if you have family members with disabilities.
Our Stone Owl team is here to help you implement these strategies for the best outcomes. Contact us to schedule a year-end review and ensure your financial plans are on track as we move into 2025.
