Ending sturdy: your year-end monetary planning information

As 2024 wraps up, it’s a good time for Canadians to consider year-end planning. Taking a better take a look at your funds now may help you enhance your monetary well being and doubtlessly save on taxes. This information will cowl some useful methods, together with charitable donations, medical bills and promoting investments at a loss, together with easy suggestions for every.

1. Charitable donations

Donating to charity is a superb technique to assist causes you care about, plus it could actually supply some good tax advantages. In Canada, you may declare a non-refundable tax credit score for donations made to registered charities.

To qualify for the tax credit score, your donation should go to a registered charity acknowledged by the Canada Income Company (CRA). This broadly contains non-profit organizations, instructional establishments and hospitals. You will need to be aware that not all donations are made to registered charities, so if the tax side is vital, you’ll want to examine their charity standing earlier than donating. For instance, a donation to a GoFundMe web page wouldn’t be made to a registered charity and, subsequently, wouldn’t be tax-deductible, despite the fact that you donated. Right here’s how the tax charge credit work:

• You’ll get a 15% credit score on the primary $200 of donations.
• For donations over $200, the credit score jumps to 29% (or 33% should you’re a high-income earner).

Remember that should you and your partner or common-law companion each make donations, you may mix them on one tax return for a much bigger tax credit score!

Make your donations earlier than Dec. 31 to assert them in your tax return. Don’t overlook to acquire official receipts because you’ll want these to assert your credit score.

2. Medical bills

Medical bills can considerably impression your taxes, and realizing the best way to declare them can result in some useful deductions. In Canada, you may declare a non-refundable tax credit score for eligible medical bills for your self or your dependants.

The CRA has an inventory of eligible medical bills that may be claimed, together with:

• Funds to medical professionals like medical doctors and dentists
• Prescription drugs
• Imaginative and prescient care, comparable to glasses and make contact with lenses
• Medical gadgets, like wheelchairs or listening to aids
• Journey prices for medical companies (beneath sure circumstances)

Test the CRA web site for deductible bills that you just may overlook, together with these not coated by your advantages. Notice that standards for medical bills can differ by province.

To assert these bills, your complete should exceed a sure threshold, which is both:

• 3% of your web earnings, or
• A set quantity ($2,635 for the 2023 tax yr).

You possibly can declare eligible medical bills for any 12-month interval ending within the tax yr. Successfully clustering bills may enable you meet the brink extra simply. Preserve good information and receipts, as they’re important in your claims.

3. Promoting investments at a loss

Tax-loss promoting generally is a sensible technique to handle capital good points whereas additionally lowering tax payments. When you promote an funding for lower than what you paid, you should utilize that loss to offset good points you’ve got in the identical yr, and even carry it ahead to future years.

Standards for tax-loss promoting:

• Realized losses: You possibly can solely declare a loss should you’ve bought the funding; holding a declining asset doesn’t qualify.
• Superficial loss rule: This disallows claiming a loss should you purchase the identical or an analogous funding again inside 30 days earlier than or after the sale. This rule ensures that your losses mirror actual financial outcomes reasonably than tax methods.

• Offset capital good points: Use your losses to offset good points in the identical yr. For instance, should you made $5,000 in good points from one funding and a $2,000 loss from one other, you’ll solely pay tax on a $3,000 achieve.
• Carry ahead or backward: In case your losses exceed your good points, you may carry them ahead to offset good points in future years or again to cut back good points from the previous three years.

 

4. Basic suggestions for year-end planning

• Evaluation your monetary state of affairs: Take a while to evaluate your earnings, bills and potential tax liabilities. This may help you determine areas for enhancing your monetary technique.
• Seek the advice of professionals: Speaking to a tax skilled or monetary advisor can provide you a clearer understanding of your funds and improve your year-end planning.
• Preserve information: Keep organized information of all monetary paperwork, together with receipts for donations, medical bills and investments.

12 months-end planning is essential for people in Canada seeking to optimize their taxes and enhance monetary well-being. By contemplating charitable donations, claiming medical bills and utilizing tax-loss promoting properly, you may make knowledgeable monetary choices that profit you now and sooner or later. With a little bit of considerate planning, you may set your self up for fulfillment within the coming yr!

Shalini Dharna is a CPA and Funding/Insurance coverage Advisor at Dharna CPA Skilled Company. 

The publish Ending sturdy: your year-end monetary planning information first appeared on Canadian Immigrant.