How to Impress Your Banker

In between the hustle and the bustle, the toasts and the stuffing, spend a little time to celebrate by reducing your tax bill this year!


Individuals

Generally, work towards deferring income and capital gains until the New Year especially if your marginal tax rate will be lower in 2004 than in 2003

Pay deductible expenses such as safety deposit rentals, child care expenses, donations, moving costs, professional dues, tuition, alimony, medical, political contributions, interest and other investment expenses by Dec 31. Keep all receipts!

Make R.E.S.P. contributions by Dec. 31 in order to obtain the 20% grant

If you have a loan owing to your employer, ensure that any interest that you intend to pay is paid on or before January 30, 2004

If you have a company car, you maybe able to reduce or eliminate the operating cost benefit by minimizing your personal driving or reimbursing your employer for 100% of the actual operating costs relating to personal driving

If you have a company car, you maybe able to reduce or eliminate the standby charge benefit by reducing the number of days the car is available to you or have your employer sell the car and repurchase it or lease it back from them

Income splitting arrangements requiring a loan to a family member in a lower tax bracket can be very worthwhile! Ensure that they are put in place before January 1, 2004 to take advantage of the low prescribed interest rate

If you moved to attend school or to start work in a new location, your moving expenses maybe deductible. Save your receipts!

If you are planning a move to another province, remember that you will be taxable in the province in which you reside on December 31. Try to delay moving to a higher-tax province until the New Year.


Investors

If you invest, consider selling securities with accrued losses to offset any current or prior year capital gains. Also, try to hold off selling any securities with accrued gains until the New Year. Consider that December 24th is likely the last day of trading to be considered a 2003 transaction for tax purposes.

Be aware that purchasing unregistered mutual funds in December may result in income and capital gains distributions being included in your income even though you may not have received them. In other words, delay mutual fund purchases to January to ensure that you are not allocated taxable income for 2003

Consider investments that yield capital gains over dividends particularly if your 2003 income if likely to exceed $64,000

If you are contemplating making both a charitable donation as well as selling securities with accrued gains, consider giving the securities directly as a charitable donation. Preferential tax treatment will be the result.

If you will turn 69 before the end of the year, you must wind up your RRSP by the end of the year. Consider making an RRSP contribution before December 31st for 2004. If you have unused RRSP room, or earned income you are still able to contribute to a spousal RRSP until the end of the year in which your spouse turns 69. Consider your RRSP maturity alternatives before the end of the year.


Self Employed

Determine the optimal salary/dividend mix for you and other family members for 2003. Consider paying yourself sufficient salary/bonus this year to create the room necessary to maximize your year 2004 RRSP deduction. Pay a reasonable salary to a lower-tax bracket spouse or child who provides services to your business

Update automobile records including your mileage log;

Repay any shareholder loans if you run the risk of having them included in your income because they were made in your company’s previous tax year;

If you are considering buying any depreciable assets, purchase them by Dec 31st if possible and dispose of any capital assets which will result in a terminal loss claim. Defer any dispositions that will result in income

Make any contemplated charitable donations and/or political donations before December 31st

Make any final corporate tax installments within 2 months of the year end

Make any final personal quarterly tax installments by December 15th

And since we are talking about the year end, have a happy, healthy and safe holiday season