TORONTO, Dec. 13, 2012 /CNW/ - The holiday season is in full swing. With
hosting and gift-giving making wallets a little lighter this time of
year, Ernst & Young has come up with the following tips to help
Canadians stock up on some savings — just in time for the new year.
On the first day, contribute to a tax-free savings account (TSFA). Make your $5,000 TFSA contributions for 2012, and if you haven't
contributed before, contribute up to $20,000 before the end of the
year. Consider making your 2013 TFSA contribution in early January
2013. The limit has been increased to $ 5,500 for 2013.
On the second day, contribute to education. Don't forget to make registered education savings plan contributions
before the end of the year for your child or grandchild. With a
contribution of $2,500 per child under age 18, the federal government
will contribute a grant of $500, and if you have prior non-contributory
years, the annual grant can be as much as $1,000.
On the third day, put money into a registered retirement savings plan (RRSP). The deadline for making deductible 2012 RRSP contributions is 1 March
2013. The earlier you contribute, the more time your investments have
to grow, so consider making your 2013 contribution in January 2013 to
maximize the tax-deferred growth.
On the fourth day, if you are 71 in 2012, make your final RRSP contribution no later than December 31 (not 60 days after the end of the year), and an RRSP maturity option
must be selected by the end of the year.
On the fifth day, pay tax-deductible or tax-creditable expenses before year end. A variety of expenses can only be claimed as deductions in a tax
return if the amounts are paid by the end of the calendar year,
including interest, investment counsel/management fees, safety deposit
box fees, professional dues, spousal support and child-care costs.
Charitable donations, political contributions, medical expenses, child
fitness and arts program costs, tuition fees and transit pass costs
that give rise to tax credits must also be paid before 2013.
On the sixth day, reduce or eliminate 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.
On the seventh day, reduce automobile taxable benefit. If you're an employee who uses an employer-provided car primarily for
business, you may be eligible for a reduced standby charge and a lower
alternate operating benefit, computed as one-half of the standby
On the eighth day, request reduced source deductions. If you receive tax refunds because of deductible RRSP contributions,
child-care costs or spousal support payments, consider requesting
Canada Revenue Agency authorization to allow your employer to reduce
tax withheld from your salary for 2013.
On the ninth day, consider income-splitting loans. The prescribed interest rate applicable to the exemption from income
attribution on intra-family loans is still 1% for the final quarter of
2012. That means income-splitting loans are still an excellent
tax-saving opportunity for those who have liquid or certain other
assets, and are interested in income splitting with spouses/partners
and/or children or grandchildren.
On the tenth day, review your investment portfolio. You may want to sell loss securities to reduce capital gains realized
earlier in the year. If the losses realized exceed gains realized
earlier in the year, they can be carried back and claimed against net
gains in the preceding three years, and you should receive the related
On the eleventh day, make capital acquisitions for business. Self-employed individuals and unincorporated business owners expecting
to make capital purchases for their business should consider buying
before year end to get a depreciation deduction for 2012.
On the twelfth day, if you're a business owner thinking about increasing your salaries or
dividends, consider doing it before year end if you're a Quebec or
Ontario resident. In those provinces, a new personal income tax bracket was introduced
this year. The new bracket is applicable for 2013 and subsequent
taxation years. Business owners can save tax in salaries and dividends,
and investors can benefit from lower tax rate on capital gain if
transactions are made before December 31.
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SOURCE: Ernst & Young
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