Yearend tax tips

Now is a good time to review strategies – such as those involving charitable donations and TFSAs – that are affected by the end of the calendar year

By: Clare O’Hara
October 14, 2014 November 6, 2019
23:00

Autumn is not usually regarded as the season for tax planning. But now is a good time to remind your clients of yearend tax tips that can improve their tax efficiency. Here is a checklist of items to review before Dec. 31:

– Capital gains

“With the stock market performing relatively well this year,” says Peter Megoudis, partner, tax, global employer services, with Deloitte and Touche LLP in Toronto, “many clients could find themselves with capital gains.”

If your clients don’t have sufficient losses to be carried forward from prior years, Megoudis says, they can consider selling investments with unrealized capital losses to offset this year’s gains. Clients will need to complete these transactions before yearend to offset any capital gains realized in 2014 or within the past three years.

Similarly, says Todd Sigurdson, tax and estate specialist with Winnipeg-based Investors Group Inc. in Winnipeg, if your client has net capital losses in 2014, look back three years for any capital gains.

– Charitable donations

Unlike RRSPs, for which contributions can be made during the first 60 days of the following calendar year, charitable donations must be made by yearend in order to qualify for a 2014 tax return.

Clients who are claiming a donation for the first time can benefit from the “first-time donor’s supercredit.” These clients can receive an additional 25% credit on their first $1,000 of donations.

– Flow-through entities

Clients who invest in flow-through entities, such as limited partnerships, often can deduct the entire amount invested against other income. And, if the entity eventually turns a profit, they may be entitled to some of the growth, which would likely be taxable as capital gains.

Clients who are interested in flow-through investments should purchase them before the yearend, says Jason Safar, partner in the tax services practice of PricewaterhouseCoopers LLP in Mississauga, Ont., “so they can benefit from the deductions in the current year.”

– TFSA withdrawals

Remind your clients that withdrawals made from a tax-free savings account (TFSA) in 2014 will be added back to the TFSA contribution room at the beginning of 2015.

And if clients are planning a major purchase for early 2015 using money in their TFSA, they should make the withdrawal now, thus creating room for a larger contribution in 2015.