On Posted on by Dellendo Farquharson to Accounting and Tax, Corporate Taxes, Non-Resident Taxes, Personal Taxes, Real Estate Tax, Tax Planning & Management

2024 Year-End Tax and Financial Planning Considerations in Canada

As the end of 2024 approaches, it’s crucial for Canadians to review their financial situation and consider various tax and financial planning strategies. Here’s a comprehensive guide to help you prepare for a successful financial year ahead, incorporating the latest updates and changes.

1. Registered Account Contributions

RRSP Contributions

  • Deadline: March 1, 2025, for the 2024 tax year
  • Consider maximizing your contributions to benefit from tax deductions
  • Review your available contribution room from your previous year’s Notice of Assessment

TFSA Contributions

  • 2024 contribution limit: $7,000
  • Ensure you don’t exceed your total contribution room to avoid penalties

RESP Contributions

  • Consider contributing to benefit from the Canada Education Savings Grant (CESG)
  • Maximum CESG per year: $500 (on a $2,500 contribution)

2. Tax-Loss Selling

  • Review your non-registered investment portfolio for underperforming assets
  • Consider selling investments with unrealized losses to offset capital gains
  • Be aware of the superficial loss rule: avoid repurchasing the same or similar security within 30 days
  • Important: For publicly traded securities, place your trade on or before Monday, Dec. 30, 2024, to ensure the settlement date falls in 2024

3. Capital Gains Planning

  • If you’re in a lower tax bracket this year, consider realizing capital gains
  • Be aware of potential changes to capital gains taxation:
    • As of June 25, 2024, the portion of capital gains subject to tax increased from one-half to two-thirds for personal capital gains in excess of $250,000 annually, and for all capital gains realized in a corporation or trust
    • Note: The enabling legislation has not yet been passed by Parliament

4. Charitable Donations

  • Deadline for 2024 tax year: December 31, 2024
  • Consider bunching donations in a single year to maximize tax credits
  • Explore options like donating securities with unrealized capital gains for additional tax benefits

5. Medical Expenses

  • Gather all medical receipts for the year
  • Consider timing elective medical procedures to maximize your claim
  • Remember, you can claim expenses for any 12-month period ending in 2024

6. Business Owners: Year-End Planning

  • Review your compensation strategy (salary vs. dividends)
  • Consider timing of expenses and revenue recognition
  • Explore options for paying out dividends or declaring bonuses before year-end
  • Be aware of potential payroll remittances due on January 15 or T-slip preparation in February

7. Review Government Benefits

  • Check eligibility for various benefits (e.g., Canada Child Benefit, GST/HST credit)
  • Ensure your income information is up to date with the CRA

8. Prepare for Potential Tax Changes

  • Be aware of potential changes to tax rates and policies
  • Consider strategies to mitigate the impact of any anticipated changes
  • Stay informed about the potential sunsetting of elements from the 2017 Tax Cuts and Jobs Act in 2026

9. Estate Planning Review

  • Review and update your will and power of attorney documents
  • Consider the tax implications of your estate plan and explore strategies to minimize estate taxes
  • Be aware of potential changes to lifetime gift tax exemption amounts

10. Retirement Planning

  • Review your retirement savings strategy
  • If you’re 71 this year, remember to convert your RRSP to a RRIF or annuity by December 31
  • Be aware of new rules for inherited retirement accounts coming into effect in 2025

11. Foreign Currency Considerations

  • When selling investments denominated in foreign currencies, be mindful of the impact of exchange rates on your capital gains or losses
  • Calculate your adjusted cost base (ACB) and proceeds of disposition in Canadian dollars to determine the true capital gain or loss

12. Gifting to Loved Ones

  • Take advantage of the increased gift tax exclusion amounts for 2024
  • Consider contributions to 529 plans, which qualify for the annual gift tax exclusion

Remember, tax planning should ideally be a year-round activity. These year-end considerations are meant to complement your ongoing financial strategy. Always consult with a qualified financial advisor or tax professional for personalized advice tailored to your specific situation.