Clark Wealth Management Group - ScotiaMcLeod Fredericton

Besides the obvious Christmas shopping that needs to be done soon, there are a few time-sensitive financial items that you may want to address before we ring in the 2011 New Year.

Charitable donations that you intend to use as a deduction on your upcoming tax return must be made before the end of the year. If you’re particularly generous you can claim donation up to 75% of your net income. Donate more than that and you can carry those amounts forward up to five years. Keep in mind as well that when publicly listed shares are donated, the capital gain is no longer taxable.

Tax loss selling of assets to crystallize capital losses must also be settled before the end of the year. Where it involves publicly traded securities, your last day to trade on the Canadian stock market is December 24th and for transactions in the US the last day you can trade is December 28th. Keep in mind that there are rules you must pay attention to avoid having a loss deemed to be superficial. Speak with your tax or financial advisor about these rules. 

You may be interested in utilizing previously realized capital losses this year as well. Don’t forget that you can use these “banked” losses to offset capital gains. With the recovery we’ve had in some investments, this may be a good time to sell some that have increased in value and pay little or no tax on the capital gain. Keep in mind that the same trading deadlines mentioned earlier apply if you intend to account for these gains on your 2010 tax return.

Registered education savings plan contributions should be made by December 31st to maximize the income deferral and benefit from the Canada Education Savings Grant. Remember, in most cases you’re going to get a grant of 20% of whatever you contribute to an RESP, to a maximum of $500 if the beneficiaries are under 18 years of age so don’t delay.

If you’ve turned 71 years of age in 2010 any RRSPs you have must be terminated and, to avoid being fully taxable in 2010, converted to a RRIF or annuity by December 31st.

It often makes sense to delay non-registered purchases (outside of a retirement savings plan) of mutual or segregated funds until after the year-end distributions are made. Ignoring this can result in you receiving a tax bill for the whole year’s progress made by the fund while never having benefited from the income and growth you’re being taxed on. Not a pleasant prospect.

Although the year-end is not an actual contribution deadline for Tax Free Savings accounts (TFSAs) it is a good time to remember that starting the first day of the new year you will be able to put another $5,000 into that account. The combination of tax-free and legal is always good so be sure to maximize use of the TFSA if you can do it at all.

Some other payments that must be made by December 31st to be considered in your 2010 tax return include: Investment management and custody fees; loan interest; safety deposit box rental fees; alimony/maintenance payments; political contributions; moving expenses; tuition fees; child care; and professional fees.

This is not intended to be an exhaustive list. It is simply a primer to get you thinking about these important items that need attention before year-end. To make sure you don’t miss any opportunities on the tax front consult your own tax advisor.

Keir Clark, is a senior wealth advisor, with Clark Wealth Management Group and branch manager at ScotiaMcLeod in Fredericton, NB. He can be reached online at www.keirclark.ca or by telephone at 506-450-6465.

Information and opinions contained herein have been compiled from sources believed reliable but no representation or warranty, expressed or implied, is made as to the accuracy or completeness.