Tax items to discuss with clients before year-end

As you plan year-end meetings with clients, there are important new deadlines to keep in mind. They apply to tax-loss selling, first-time charitable donations and to business owners with private corporations.

For tips and reminders, check out a new report from Jamie Golombek, managing director for tax and estate planning at CIBC Financial Planning & Advice.

Read: Essential tax numbers: updated for 2017

For starters, he notes the window for tax-loss selling (to offset capitals gains from other investments) has changed. Investors now have two business days, rather than three, to settle equity and long-term debt market trades, so those trade dates must be no later than Dec. 27, 2017, Golombek writes.

Transferring an accrued loss to an RRSP or TFSA is not allowed under the tax rules, he says, so there are penalties for swapping an investment from a non-registered account to a registered account for cash or other considerations.

Also, owners of private corporations should be mindful of the federal government’s proposed tax changes for income sprinkling and passive investment, as the changes could, depending on the province, result in tax rates of more than 40% when small business income is distributed as dividends to family members after 2017.

Read: How proposed tax changes target income sprinkling

Also read:

• Tax proposal summary: what’s in, what’s out
• Liberals to index CCB, expand working income tax benefit
• Liberals to cut small business tax rate to 9% over 2 years

“It will be particularly important to plan before year-end for changes that are expected to be implemented in 2018, which may involve paying extra dividends to non-contributing family shareholders before January 1, 2018,” Golombek says.

When it comes to donations, the end of this year is also important. That’s because 2017 is the last year to claim the First-Time Donor’s Super Credit, which provides an additional 25% tax credit on monetary donations up to $1,000. If clients want to take advantage of this credit, remind them that Dec. 31 is the last day they can donate and get a receipt, which they need to make a claim.

Golombek notes this could be a good opportunity for millennial clients who, for the first time, have disposable income they wish to donate.

Read the full report here.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.