It’s Not All Christmas Lights and Egg Nog - There’s Some Year End Planning to Do!
Hi, ! Are your lights up yet?
As we enter the season filled with lights, parades, and the smell of firs in our houses, it is also the last chance to make certain financial decisions prior to the end of the year.
Before I get into that, there was a recent announcement from the Canadian government that stated they are raising the Tax-Free Savings Account (TFSA) yearly contribution limit in 2024 to $7,000. This will be the first time that the yearly limit has been raised in consecutive years (thanks inflation!). For those that were born in 1991 or later, you will have a new total contribution limit of $95,000 as of January 1st, 2024. As I’m sure you are aware, the contribution limit carries forward, so if you haven’t fully contributed to your TFSA, there’s still time to catch up.
There is some year-end planning that can be done when it comes to the TFSA as well. If you take out any funds from a TFSA in a calendar year, you lose that room for that year, but it resets the following year. If you have a goal or need in first part of 2024 and are going to need some money from the TFSA, it might make sense to pull it now and have the contribution room available again in 2024, not 2025.
It’s also a great time to look into the First Home Savings Account (FHSA) - if you’re not currently a home owner and haven’t been over the past 4 years. This new account has yearly contribution limit of $8,000, but can be carried forward. The caveat, you have to have an account open to get the room. If we open the account this month, you will have the $8,000 from 2024 and then $8,000 from 2025 - if we wait until January, you will only have the $8,000.
We often hear of Tax-Loss Selling at this time of year and it could be a great option if you have capital gains this year or during the past three years. If you have a security with a loss in your non-registered account, this could be the time to sell it to offset some of those gains. We have to be careful not to buy back those securities within the next thirty days or you could lose the offset. On the other side, if you’re planning on realizing capital gains it might be worthwhile to have a look at your marginal tax rate from 2023 and where you expect to be next year.
It’s also a great time of year to have a look at what donations you’re going to want to make to help reduce your taxes for this year. There have been many changes on how this all works, so you can check out the podcast that Erin and Adrian recently put out (here), or let’s get on a quick call to make sure that you’re not only doing the right thing for the charity you support, but also in the most tax-efficient way.
Lastly, although there are carry forward rules around RESPs, there is only so much you can make up each year if you fall behind. If you’re looking to put some money into the kid’s/grandkid’s education fund, getting it in before the end of the year might be advantageous.
This is not an extensive list, but there are some key dates that could really help minimize taxes for 2023 and set you up in a great situation for 2024. Our team is here to help and have conversations with your tax team to make sure that we’re not only building wealth through investing, but also minimizing taxes and setting you up for future successes.
Have a great weekend,
Trevor
PS Check out our videos here! Also like and follow our social pages (below) to stay up to date on anything that’s happening that you need to know!
