2014 Year-end Tax Planning Checklist
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Financial planning is time sensitive. While the following list is not exhaustive, here are some items that must be considered, incurred or paid prior to year end in order to be included in your 2014 tax return.
Prior to December 24, 2014:
- Put tax loss selling strategies to work by following these steps:
- Calculate the capital gains that you have realized for 2014.
- Identify and sell investments that are in a loss position. Trades entered by December 24th will settle funds in the account prior to December 31st.
- Net your capital losses against capital gains on your 2014 tax return.
Note: If your spouse has unrealized capital losses, extra steps can be taken to incorporate them in your tax planning. In all cases, you should be aware of the superficial loss rules when employing these strategies.
Prior to December 31, 2013:
- Make charitable donations. Donating qualifying securities instead of cash can increase your tax savings.
- Contribute to your child’s RESP/RDSP.
- Withdraw funds from a TFSA, if needed. Any withdrawals will increase your contribution room in 2015.
- Withdraw funds from your RRSP if you are in a low tax rate for the 2014 tax year.
- If you are age 71 this year, you must convert your RRSP to a RRIF. Consider the following:
- Use your younger spouse’s age for minimum payment calculations.
- Consider an advance contribution to your RRSP for earned income from this year.
- Pay all tax deductible expenses.
- If you are a trustee of a testamentary trust, consider triggering income (like capital gains) before the end of the year as income retained inside the trust will be taxed at the highest marginal tax rate starting in 2016.
- Stock Option Rules - Special Relief: If your taxes are higher than the proceeds upon the sale of your shares following the exercise of your stock options, there is some relief if you sell the shares prior to 2015 and make proper election prior to December 31st, 2014.
- If you are selling the assets of your corporation, be sure to complete the transaction by December 31st, 2014. The tax treatment on the sale of eligible capital property will be changing in 2015.
- Consider paying an employee a non-cash gift or award of up to $500. This amount may be deductible to you and non-taxable to the employee.
For January 2015:
- Remember to pay interest on prescribed rate loans (e.g. spousal loans) prior to January 30th.
For March 2015:
- You have until March 2nd, 2015 to make your RRSP or a spousal RRSP contribution, and deduct the amount on your 2014 (subject to your RRSP contribution limits) tax return.
Ongoing reporting obligations:
- If you hold foreign property with a cost base greater than $100,000, file the Foreign Income Verification Statement (CRA Form T1135). As of June 2014, new rules apply to disclosure of this information.
- If you are a U.S. Person for tax purposes, understand your IRS reporting requirements. U.S. Persons (even those who are resident in Canada) have tax reporting requirements in the U.S. For example, U.S. persons are required to report any holdings in Passive Foreign Investment Companies (PFICs).
Note: Beginning in 2014, Canadian financial institutions are required to report certain information on U.S. persons as a result of the U.S. Foreign Account Tax Compliance Act (FATCA).
New tax measures:
- Family Tax Cut – Income Splitting. In the October 2014 Federal Tax Update a new non-refundable tax credit of up to $2,000 was introduced for eligible couples with minor children. The new credit will be effective for the 2014 and subsequent tax years.
- Child Care Expenses and The Universal Child Care Benefit. Effective 2015 there will be an increase in the Child Care deduction by $1,000. The Universal Child Care Benefit (UCCB) will also increase to $160 per month for children under the age of six, and $100 per month for those ages six to sixteen. As a result of the UCCB changes, the Child Amount Tax Credit is being repealed in 2015.
We recommend you discuss these strategies with your professional investment, tax and legal advisors prior to implementation to ensure they fit within your overall wealth plan.
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