Don’t just talk tax during RRSP season

Talk to clients about tax savings year round, says Jamie Golombek, managing director of tax and estate planning for CIBC Wealth Advisory Services.

During portfolio reviews, for instance, check if dividends are held outside registered plans since they’re tax-advantaged. Same goes for stocks, since capital gains are only taxed at 50%.

Read: The pros and cons of foreign dividends

Fixed-income vehicles, on the other hand, are best placed in registered accounts such as RRSPs, RRIFs and TFSAs since interest income will then be sheltered. If people take advantage of tax credits and strategies, says Golombek, they can “invest in a tax-efficient manner over the long term.”

Read:

• 6 year-end strategies for saving on tax
• Top tax changes of 2013

He also suggests advisors talk to clients about spousal loans since the prescribed rate of the loans dropped down to 1% at the beginning of January 2014.

Spousal loans offer “the opportunity for a high-income spouse to loan money to a low-income spouse,” says Golombek. Then, the high-income spouse can “charge 1% interest on that loan [and is] able to income-split anything above that rate and have that [portion of income] taxed in the lower-income spouse’s hands.”

Read:

• Save tax with family loans
• Exclusive: Spousal loan rate will drop back to 1%, says Golombek

Maximize registered plans

Registered savings plans are easy giveaways from the government, says Golombek.

The problem, he says, is “we still meet…clients who haven’t opened [accounts such as] TFSAs because they say it’s too much trouble,” notes Golombek.

Regarding RESPs specifically, he suggests people do more than contribute the annual bare minimum of $2,500. Most stop at this amount, finds Golombek, since government grants (which are equal to 20% of the amount contributed) are capped at $500.

People “can’t get into an over contribution situation,” he adds, but they should aim to reach the $50,000 lifetime limit of RESPs throughout their children’s lives to shelter income from taxes while using the account.

Read:

Maximize benefits of RESPs and RDSPs

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