While you are busy with your year-end tasks and planning your holiday merrymaking, you should also include a little tax planning. There are receipts to find and records to review – not just for the upcoming tax season but for the year ahead.
Take a moment to review the following list of important items and important deadlines:
1. Tax Rates
The 2013 Federal Budget announced an increase to the effective income tax rate applicable to non-eligible dividends paid after 2013 to better integrate small business active income earned by a Canadian Controlled Private Corporation. As a result of these changes and the BC temporary tax measures*, the combined top marginal personal tax rates for BC residents for 2013 to 2016 are outlined as follows:
|
2013 |
2014 |
2015 |
2016 |
|
| Employment income |
43.70% |
45.80% |
45.80% |
43.70% |
| Capital gains |
21.85% |
22.90% |
22.90% |
21.85% |
| Non-eligible dividends |
33.71% |
37.98% |
37.98% |
35.51% |
| Eligible dividends |
25.78% |
28.68% |
28.68% |
25.78% |
2. RSP annuitants who turn 71
For individuals who turned 71 during the year, you have a last chance to make your final contribution to your RRSP. The last date to convert your RRSP to RRIF is also December 31.
3. Making your RRSP contributions
The maximum 2013 RRSP contribution limit is $23,820. The deadline for 2013 RRSP contribution is March 3, 2014. The maximum 2014 RRSP contribution limit is $24,270. If you haven’t already maximized your 2013 RRSP contribution and/or you would like to make your 2014 RRSP contribution in January, please contact me.
4. Making your RESP contributions
An RESP is the best investment for your children and grandchildren’s education. The RESP deadline is December 31. Take advantage of the benefits of 20% basic government grant on your 1st $2,500 RESP contribution. The maximum annual RESP contribution is $5,000 per child.
5. Tax Free Savings Account (TFSA)
A TFSA is the best income shelter vehicle since RRSPs. Your investment in a TFSA is TAX FREE. Starting January 1 2014, you have an opportunity to make your 2014 TFSA contribution of $5,500. For clients who have never opened up a TFSA before and were at least 18 yrs of age in 2009, your total cumulative TFSA contribution room starting January 1, 2014 will be $31,000.
6. Are you making any charitable donations?
If you are planning to give cash, property or securities, it is important to make sure all donations are made by December 31 in order to realize the tax benefits on your 2013 return. Please consult your tax professional for more details.
7. Income splitting/Pension splitting
Couples should consider the potential benefits of income-splitting — the practice of shifting income from the higher income spouse to the lower income spouse to reduce taxes. Pension splitting allows Canadians to split up to half of their pension income with their spouse or common-law partner. Aside from the benefit of reducing taxes, one may also be able to preserve some or all of the age credit and minimize the Old Age Security Clawback. Please consult your tax professionals for more detail.
8. Any other changes in 2013?
Did you have any material changes such as change of jobs, retirement, family changes, asset changes & etc? If you have made any of these changes, it is time to review the impact to your financial plan.
I wish you and your family a safe holiday season.
*Assumes the BC temporary tax measures will expire after December 31, 2015