Several important year-end tax deadlines are looming, and advisors should remind clients to act now in order to reduce their tax bills, according to BMO Nesbitt Burns tax expert John Waters.

Waters says waiting until April to start thinking about taxes is too late, because many of the cut-off dates that impact tax savings fall prior to the calendar year-end.

“Now is the time to act before the filing deadline so you can save on 2009 taxes,” he says.

Advisors should remind clients of the following tax saving strategies that have looming deadlines:

1) Tax instalments – Deadline: December 15

Some Canadians, such as the self-employed, may be required to pay 2009 income tax instalments if their estimated income tax payable for the year or their income tax payable for either of the two preceding years exceeds $3,000, or $1,800 for Quebec residents.

Personal Tax instalments are due four times a year, with the final instalment due December 15. Canadians could incur non-deductible interest if they fall short on any of their instalments, so now is a good time to remind clients to revisit the instalments made to date to determine if a top-up is required, Waters points out.

2) Tax-loss selling – Deadline: December 24

Advisors should remind clients that they can sell investments which have depreciated in value so that the capital losses can be used to offset any realized gains. To be effective for tax purposes in the current year, tax-loss selling transactions must settle before the last business day of the year. Since settlement can take up to three days, BMO Nesbitt Burns advises clients to do this by December 24th for securities trading on Canadian stock exchanges.

3) Prescribed Rate Loans – Deadline: December 31

Many Canadians are taking advantage of the low prescribed interest rates to implement an income-splitting strategy involving investment loans to family members. The all-time low rate of 1% is in effect for loans made by December 31, 2009. For subsequent loans, the CRA’s prescribed rate at the time of the loan will apply.

4) Donations – Deadline: December 31

Another way to offset capital gains is to donate appreciated qualifying publicly traded securities to charity. This will produce a tax receipt equal to the fair market value of the investment donated, while at the same time potentially eliminating any capital gains tax otherwise payable on the donated security. Advisors should remind clients that donations must be made before December 31st in order to receive a tax receipt for 2009.

December 31st is also the final payment date for a 2009 tax deduction or credit for expenses such as childcare, medical, tuition and alimony payments.

5) Contribute to an RDSP- Deadline: December 31

The new Registered Disability Savings Plan is available for all persons eligible for the Disability Tax Credit and resident in Canada. It allows families of Canadians with disabilities to set aside and invest money for their continued support. These investments can grow tax-free until needed. Under certain conditions, the federal government will contribute up to $70,000 in grants or bonds.

6) Dividend Income – Tax Rates changing after December 31

Beginning in 2010, the effective tax rate on eligible dividends is increasing. In light of these changes, advisors should help investors review their portfolios to consider whether any changes to their investment mix are warranted.

7) Home Renovation Tax Credit – Deadline: January 31

Canadians don’t have much more time to take advantage of the Home Renovation Tax Credit. The credit is only applicable for the 2009 taxation year, although homeowners have until January 31, 2010 to incur eligible renovation expenses to apply on their 2009 tax returns.

IE