Year-end is the perfect time to review you financial situation and explore opportunities to reduce personal income tax before the December 31 deadline. Here are some tips to consider for reducing your net income.
December 31, 2017 is an important deadline to consider if you hope to receive the First-Time Donor’s Super Credit. If you donate before year-end, you will have a tax credit for 2017, and any capital gain will be eliminated. 2017 is the last year you will be able to receive this 25% tax credit up to $1000.
If you are planning to invest in an interest-bearing security with a maturity in one year or greater, it’s best to wait to purchase in 2018. This will ensure you will not be required to pay tax on accrued interest until 2019. This applies to investments such as GICs and mutual funds.
Pension Income Splitting
You may allocate a maximum of 50% of your pension income to your spouse or common law partner if you qualify for a pension tax credit.
By giving a loan to your spouse in a lower income tax bracket, you can reduce your tax payable. Your spouse can use the loan to invest in real estate, business, stocks and other investments. Income generated from those investments would be considered part of your spouse’s taxable income.
Split Your TFSA with a Family Member
Income from Tax Free Savings is tax-free. Investments to a family member’s TFSA may be gifted to them free of tax as well.
Home Buyer’s Plan Repayments
To ensure your Home Buyer’s Plan repayments are not included in your 2017 taxable income, remember to make your annual RRSP repayments by December 31.
Did you report capital gains in one of the previous three years? It’s a good idea to sell any losers, or transfer them to a child by December 31st so you can apply these capital losses against gains realized over the past three years. Any excess may be carried forward to future tax years indefinitely.
Brooks Financial is vigilant about claiming every tax deduction and credit you are entitled to. Contact us today to find out how we can help you control the income tax you pay.