December 2018

A few year-end reminders
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A few year-end reminders

A few year-end reminders

December 31 is just around the corner, but it might not be too late to take some steps that could make a noticeable difference when come tax time. With that in mind, here are 8 important year-end reminders.

  1. If you own a business
    Just a few weeks ago, federal Finance Minister Bill Morneau tabled a budget update announcing a number of a fiscal measures aimed at encouraging business investment in new goods and equipment. These measures took effect on November 20, 2018. Given that the end of the year is a time when business owners often make decisions about their company’s retained earnings and cash on hand, you would probably want to look into this if you yourself own a business.
  2. Passive income: new rules take effect in 2019
    In the same vein, the majority of the federal tax reform provisions will take effect in 2019, including the one on passive income, i.e., corporate earnings that come not from ongoing operations but from investments. If you have your own company, it could be worthwhile to get tax advice about this promptly, to decide if it could be in your interest to make certain decisions before the end of 2018.
  3. For the financial markets, 2018 ends on December 27
    Since the transaction settlement period for Canada’s financial markets is two business days, Canadian investors have until Thursday, December 27, to make securities transactions in 2018. Transactions made after that will apply to 2019.*
  4. TSFA: annual limit rising to $6,000
    Created in 2009, the TFSA remains a popular tax shelter, given that all gains and income accruing in the account are completely tax free, even when withdrawn. Since contribution room can be carried forward from the time this account was introduced, your cumulative limit would be $57,500 in 2018 if you were at least 18 years old in 2009 (otherwise, your limit depends on the year you turned 18). Something new: as of 2019, we will be allowed to deposit up to $6,000 per year in a TFSA. However, if you are planning to make a withdrawal, it might be a good idea to do so before December 31. That way, you would free up an equivalent amount of contribution room for 2019 on top of the annual $6,000. If you were to wait until January, you wouldn’t get the contribution room back until 2020.
  5. Turning 71 this year? Time to act
    Another important deadline: if you turned 71 in 2018, there are two decisions you need to make. On one hand, you have until December 31 to make one last contribution to your RRSP; on the other, you must also close your RRSP by the end of the year. Consequently, as of December 31 you must either withdraw all of your funds from your RRSP (which is not usually recommended because the whole amount would be taxable), or transfer this money into a disbursement vehicle such as a registered retirement income fund (RRIF) or an annuity.
  6. Purchase now or in January?
    Many financial markets have been down significantly in recent weeks. If this situation makes you feel like buying some new mutual funds* to take advantage of today’s much lower prices, you might want to check with your advisor first to see if these funds are about to pay year-end distributions. If so, this income would be added to your earnings for 2018 and would be taxable on your next income tax return, even if you just bought your units and did not dispose of them. Of course, this is not a concern if you are investing inside a tax-free or tax-deferred account (TFSA, RRSP, RRIF, RESP, etc.).
  7. Planned giving strategy
    The end of the year is a good time to offer substantial support to causes that are close to your heart, because a major gift could result in a tax credit you could claim on your tax return for 2018. Furthermore, if you were to make this donation in the form of eligible securities, no tax would apply to the capital gain you would otherwise have realized. In this respect, if you wish to donate in this way and make your charitable giving part of an organized approach, it might be a good idea to get some professional advice about setting up a planned giving strategy.
  8. Always a good time for an RESP
    Finally, what would you say to a top-up of at least 20% on a deposit that you could make between now and the end of the year? That’s about what you would get with an RESP (registered education savings plan), since each year’s contributions are eligible for a grant, the CESG, which equals no less than 20% of annual contributions, and even more on the first $500 you contribute, depending on your family net income. The annual maximum CESG ranges from $500 to $600 based on family net income, and the lifetime limit is $7,200. Your unused grant room can be carried forward over the years but, if you are a parent or grandparent, why not contribute a certain amount right now? Note that in addition to the CESG, you could also receive additional amounts depending on your province of residence (Quebec, for example, tops up your contribution by another 10%, with a maximum of $250 per year).

These eight reminders only scratch the surface of the many decisions you might benefit from considering before the year ends. For a more extensive review, you may wish to talk to your mutual fund representative, financial security advisor, accountant or tax advisor.



Mutual funds are offered through mutual fund representatives associated with SFL Investments Financial Services Firm.

The following sources were used to prepare this article.
Actualis, “ Back-to-school special: Savings 101 ”, September 2015; “ Philanthropy: an important part of an integrated financial plan ”, April 2018.
Toronto Stock Exchange, “ Holiday Schedule ”, 2018.
Finance et investissement, “ Revenus passifs : il est temps de faire le ménage ! ”, October 15, 2018.
Finance et investissement, “ CELI : le plafond passe à 6 000 $ en 2019 ”, November 19, 2018.
Government of Canada, Fall Economic Statement 2018 ”, November 21, 2018; “ MP, DB, RRSP, DPSP, and TFSA limits and the YMPE ”, December 15, 2016; “ RRSP options when you turn 71 ” “ Canada Education Savings Grant (CESG) ”.
Les affaires, “ Fonds communs: gare aux distributions de fin d'année ”, October 31, 2016; “ Investisseurs, attention aux distributions imposables de fin d'année ”, December 11, 2015.