The 2010 tax filing deadline is still a few months away, but considering tax saving strategies before the year-end can help you maximize savings for clients, according to John Waters, manager of tax planning at BMO Nesbitt Burns.

Waters warns that waiting until the new year to start thinking about taxes is too late, since many cut-off dates that can reduce clients’ taxes fall at the end of the calendar year.

“There are many tax-saving strategies, some very simple, that Canadians can use to realize tax savings if these strategies are undertaken before the end of 2010,” said Waters.

A recent Nesbitt Burns survey found that more than three-quarters of Canadians do not take tax implications into consideration when investing and almost 40% are unsure if they are taking advantage of all tax incentives available to them.

Here are five year-end tax-saving strategies for your clients to consider:

1. Previous year tax payment installments – Deadline: December 15, 2010

If a client’s estimated income tax payable for the year, or his/her income tax payable for either of the two preceding years exceeds $3,000 ($1,800 for Quebec residents), he/she may be required to pay income tax installments. Personal tax installments are due four times a year, with the final installment due December 15.

Clients who fall short on any of their installments could incur non-deductible interest. Revisit clients’ installments made to date to determine if a top-up is required.

2. Tax-loss selling – Deadline: December 24, 2010

If clients have investments that have depreciated in value, they can sell these investments before year-end to offset capital gains realized earlier in the year and reduce their overall tax bill.

It’s critical to ensure that a sale makes sense from an investment perspective since stocks sold at a loss cannot be repurchased until at least 30 days after sale to be effective.

3. Charitable donations – Deadline: December 31, 2010

Instead of donating cash to charities, encourage your clients to consider donating appreciated publicly-traded securities, which can provide a tax credit equal to the value of the securities donated. Doing this could potentially eliminate the capital gains tax otherwise payable on the gain accrued on the security. Ensure that clients make all charitable donations by Dec. 31 in order to receive a tax receipt for 2010.

Dec. 31 is also the final payment date for a 2010 tax deduction or credit for expenses such as childcare, medical tuition and alimony payments.

4. Dividend income – Deadline: December 31, 2010

Personal tax rates on eligible dividends were increased in 2010, with further rate increases occurring in 2011 and 2012. In light of these recent changes, help clients review their portfolios to determine if any changes to their investment mix are warranted.

5. RDSP contributions – Deadline: December 31, 2010

The Registered Disability Savings Plan, designed for individuals with disabilities, combines the advantages of tax deferred investment growth with the opportunity to receive government subsidies. Remind clients that the deadline for plan contributions is Dec. 31.

IE