Answer these 9 year-end tax questions

Now is the time to be proactive about tax planning.

According to an EY year-end report, you should be prepared to ask and answer the following questions before 2016 comes to a close. Then, along with tax and financial planning professionals, you’ll have identified tax savings opportunities long before it’s time to file in April.

1. Are there income-splitting strategies available to me?

Determine if you can take advantage of any differences in tax brackets and marginal rates in your family. Think about income-splitting loans, spousal RRSPs and offering reasonable salaries to family members.

2. Have I paid my 2016 tax-deductible or tax-creditable expenses yet?

There are a variety of expenses, including interest and childcare costs that can only be claimed as deductions in a tax return if the amounts are paid by the end of the calendar year. Check on expenditures that give rise to tax credits and consider whether the deduction or credit is worth more to you this year or next year.

3. Have I considered the impact of any changes to personal tax rules that are effective for the year?

If you have sold a principal residence in 2016 or hold any linked notes that are maturing after 2016, you may be subject to new rules announced by the federal government this year. You should consider the impact of these rules.

4. Have I maximized my tax-sheltered investments by contributing to a TFSA or an RRSP?

Make your TFSA and RRSP contributions for 2016 and catch up on prior non-contributory years. In order to maximize tax-free earnings, consider making your 2017 contributions in January.

5. Have I maximized my education savings by contributing to an RESP for my child or grandchild?

Make registered education savings plan (RESP) contributions for your child or grandchild before the end of the year. With a contribution of $2,500 per child under age 18, the federal government will contribute a grant (CESG) of $500 annually.

6. Is there a way to reduce or eliminate my non-deductible interest?

Interest on funds borrowed for personal purposes is not deductible. Where possible, consider using available cash to repay personal debt before repaying loans for investment or business purposes, on which interest may be deductible.

7. Have I reviewed my investment portfolio?

Consider if you have any accrued losses to use against realized gains and determine if you have realized losses to carry forward.

8. Can I improve the cash flow impact of my income taxes?

You should determine if you’re eligible to request reduced source deductions and see if you’re required to make a December 15, 2016, instalment payment.

9. Have I thought about my estate planning?

The end of the year is a good time to review and update your will and succession plans, and consider if there are changes to your life insurance needs. It may also be the right time to consider an estate freeze to minimize tax on death and/or probate fees.

For more on taxes, read the following articles.

Tax help for Canadians in the North

Taxes for East Coast Canadians

4 year-end tips for reducing your tax bill