Managing Director, Tax & Estate Planning
CIBC Financial Planning and Advice
Making the most of tax credits and savings takes planning, and what better time to set out a money-maximizing strategy than the beginning of the year?
Here are my top 10 tax resolutions for minimizing your tax burden and maximizing your financial position in 2019.
- Contribute $6,000 to your TFSA for 2019. As of 2019, the cumulative TFSA limit is $63,500 so if you were at least 18 in 2009 and haven’t yet maximized your cumulative TFSA contributions, you can start today!
- If you expect to be in a lower tax bracket when you retire than you are this year, consider making an RRSP contribution. While much of the focus in the first 60 days of the year is on the 2018 contribution deadline of March 1, 2019, why not get a head start on your 2019 contribution? The RRSP limit for 2019 is 18 per cent of 2018 earned income, to a maximum of $26,500.
- If you’ve got kids under 18, consider contributing at least $2,500 to each child’s Registered Education Savings Plan (RESP) this year to take advantage of the $500 Canada Education Savings Grant (CESG). You may also be able to catch up on missed grants from prior years.
- Consider opening up a Registered Disability Savings Plan (RDSP) for a family member with a disability. You can contribute up to $200,000 over the disabled beneficiary’s lifetime, which may be augmented by up to $90,000 in Canada Disability Savings Grants and Bonds.
- Consider rebalancing the asset allocation in your non-registered portfolio to earn income that is taxed at more favourable rates. Equities can generate capital gains when sold at a profit and these gains are only 50% taxable, while Canadian dividends benefit from the dividend tax credit. Since equities may have higher risk than some other investments, any changes in asset allocation should be in line with your risk tolerance.
- If you have a spouse or partner (or kids) in a lower tax bracket, consider a prescribed rate loan strategy whereby the higher-income spouse or partner loans funds to the lower-income spouse or partner to invest at the prescribed rate, which is at 2% until at least March 31.
- When planning your charitable giving for 2019, consider donating appreciated securities directly to your charity of choice to eliminate tax on any accrued capital gains.
- Make sure your will is up to date. If you haven’t updated your will in some time, why not have it reviewed in 2019 to ensure that it’s still in line with your testamentary wishes.
- Plan now to avoid a tax refund next spring. If you regularly get a large tax refund each spring, consider applying for a reduction of tax at source using CRA Form T1213 (and form TP-1016-V in Quebec). Unfortunately, this needs to be repeated annually.
- Get organized. It will be easier for you or your accountant to prepare your tax return when you have all the information at hand. Set up files for documents that support your income, expenses and credits. Then, as receipts come in, you can drop them into the files for easy access at tax time.