December 2017

8 year-end reminders
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8 year-end reminders

8 year-end reminders

When it comes to personal finance, December is a very special month: it’s our last chance to make decisions that may have an impact on our next income tax returns. Here are 8 important reminders.

  1. Top priority: talk to your tax advisor 
    In 2017, the federal Minister of Finance, Bill Morneau, proposed some hotly debated tax reforms. He also announced a reduction in the small business tax rate as of 2019. If you are a business owner or an incorporated professional, if you run a farm corporation, if you distribute part of your business income to family members, or if you use your operating or management company to make investments that are not related to the company’s business (known as “passive investments”), notably with a view to retirement, you may already know that these decisions could have a substantial impact on your finances. What kind of impact? To find out, you would probably need to consult a specialist and crunch the numbers for your own situation.
  2. Gains against losses, losses against gains 
    Any investments sold in 2017 could generate capital gains or losses. Remember: if you realize a loss in 2017, you can apply it against gains realized this year (first) or in the past three years, thereby reducing your capital gains tax. On the other hand, if you realize a capital gain, you can apply it against past losses, which can be carried forward indefinitely.
  3. One extra day to make trades in 2017 
    On September 5, 2017, the authorities at the Toronto Stock Exchange reduced the securities transaction settlement period in Canada from three days to two days. This means that you have until December 27 to make trades and have them apply to 2017, since the settlement date will be December 29, the last business day of the year. After that, your trades will be attributed to 2018.
  4. Now or in January ?
    If you are thinking about buying mutual funds* in December, you might want to check with your advisor to find out if the funds in question are going to pay year-end distributions. If so, these amounts would be added to your income for 2017 and would be taxable on your next income tax return, even if you haven’t disposed of your units. Of course, if you hold these investments within a tax-free or tax-deferred account (TFSA, RRSP, RRIF, RESP, etc.), you won’t have to worry about this detail.
  5. TFSA: 52,000; Taxes: 0 
    Since TFSA contribution room has been accumulating since the creation of the plan in 2009, your cumulative limit will be $52,000 for 2017 if you were at least 18 years old in 2009 (otherwise, your limit depends on the year in which you turned 18). Remember that all income and capital gains generated within a TFSA are completely tax free. By the way, if you are planning to make a withdrawal from your TFSA, it could be a good idea to do so before December 31. That way, you will free up equivalent contribution room in 2018. If you wait until January, you won’t get the contribution room back until 2019.
  6. Planning to give 
    If you want to support a cause that is close to your heart, it could be a good idea to do it now so as to get a tax credit that you can claim on your 2017 return (note that the super credit for first-time donors introduced in 2013 will end this year). As well, if you make your donation in the form of eligible securities, any capital gain that is generated will not be taxed. If you are thinking about making substantial donations, you might want to get some professional advice for setting up a planned giving strategy.
  7. RRSP: the next step 
    If you turned 71 in 2017, the time has come to wind up your RRSP. Before December 31, you must either have withdrawn all of your funds from your RRSP (which is not usually recommended, given that the whole amount would immediately become taxable), or have transferred the whole amount into a disbursement vehicle such as a registered retirement income fund (RRIF) or an annuity.
  8. RESP: why wait ?
    If you’ve been contemplating a registered education savings plan (RESP) contribution, you might want to make it now to avoid any delay in receiving the Canada Education Savings Grant, equal to 20% of your contribution up to a plan lifetime limit of $7,200, and other amounts depending on your province of residence. (Quebec, for example, adds an another 10% to your contribution.)

These eight points give just a brief survey… For a more complete picture of the financial decisions to be made as the year draws to a close, you may want to contact your mutual fund representative and/or your financial security advisor, accountant or tax advisor.

* Mutual funds are offered by mutual fund representatives at SFL Investments, Financial Services Firm.

The following sources were used when preparing this article.
Actualis, «Back-to-school special: Savings101,» September 2015.
Toronto Stock Exchange, «Notice of Housekeeping Rule Amendments,» September 5, 2017; «Settlement Schedule for 2018 Holidays
Les affaires, «Réforme Morneau: une limite de 50 000$ pour les revenus passifs,» October 18, 2017.
Éducation Finance, «Les distributions dans les fonds communs de placement,» January 25, 2015.
Government of Canada, «MP, DB, RRSP, DPSP, and TFSA limits and the YMPE,» December 15, 2016.
Government of Canada, «First-time donor’s super credit,» January 4, 2017.
Government of Canada, «RRSP options when you turn 71,» November 16, 2016.
Le Devoir, «Morneau adoucit encore sa réforme,» 19 octobre 2017.
The Globe and Mail, «Seven year-end tax tips for investors,» 12 octobre 2017.