For those filing tax-returns in Canada, here are a few year-end things to consider before December 31st. If you received the CERB you will need to set aside cash when the time comes to pay taxes. Those who received Canada Recovery Benefit should also be prepared to set aside some cash in the event that their tax payable is higher than the 10% deducted by CRA.
Business owners and sole proprietors who earn direct income from their business can apply for Canada Emergency Business Account loans until March 31, 2021.
Consider contributing to a Registered Education Savings Plan (RESPs) by Dec. 31.
If you must withdraw from your TFSA and plan to recontribute the money in the future, do it in December because the amount taken out will be added to your contribution room for 2021. If you make a withdrawal in January, you will have to wait until 2022 to recontribute the amount.
Certain expenses such as professional membership fees, tuition fees, investment expenses, political contributions, and charitable donations may be payable in January. Consider paying them in 2020, to take advantage of tax deductions.
Medical expenses exceeding a threshold based on income can be claimed as a non-refundable tax credit. If you have incurred these expenses, but not yet paid them, consider paying them in 2020.
If you carried out transactions that generated capital gains this year, consider selling securities that have an accrued loss, since they can lower taxes by offsetting the loss against the gains. Be sure to make them before December 29, 2020, since it takes two business days to settle the transaction.
When you gift the proceeds of a securities sale to a charity, you incur a capital gain and have to pay a tax. Consider gifting securities in-kind directly to the charity and receive a tax credit without being taxed on the capital gain.
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