Top tips to reduce your tax bill and strengthen your returns before the end of 2021

The clock is ticking in 2021, but financial experts say there’s still time to lower your tax bill and increase your return with these simple steps.

Whether you’re a college student or an investor with sky-high returns, tax planners say these tips can help save you money.

After a year of roller coasters in the stock market, experts say now may be the time to get rid of underperforming stocks, especially if other stocks in your portfolio have performed well.

“If there is a losing stock in your portfolio, you must sell it before the end of the year if you want to use that capital loss against any other gain you have made this year,” said Jamie Golombek, director general tax and estate planning. with CIBC Private Wealth Management.

But investors only have until December 29 to execute the trade and ensure it is settled by the end of the year.

“The heat is on,” Golombek said. “You don’t want to miss that deadline or you’ve lost the opportunity to take that loss for this tax year. “

The end of the year is also a popular time for charitable giving.

The federal and provincial governments offer donation tax credits that together can result in tax savings of up to 54%, depending on how much you donate and your province or territory, Golombek said.

Investors who have seen their portfolio increase in value might consider donating these winning titles in kind to charity, he said.

Donating publicly traded securities like mutual funds to a registered charity or foundation not only qualifies you for a tax receipt for fair market value, but also eliminates capital gains tax, a declared Golombek.

Meanwhile, Canadian post-secondary students with a registered education savings plan might consider making a withdrawal before the end of the year. Although the funds are taxed as income, if the student’s income is less than the basic personal amount or if they have tax credits left for 2021, they will effectively be exempt from tax, Golombek said.

The basic personal amount – approximately $ 13,808 for 2021 – is a non-refundable tax credit that can be claimed by all individuals.

“The tuition credits carry over, but the basic personal amount… is lost forever if you don’t use it this year,” he said. “You have to be strategic. “

Another tip is to contribute to a registered retirement savings plan.

Although Canadians have until March 1, 2022 for the 2021 tax year, contributions made early are helping to stimulate tax-deferred growth.

“Now is a good time to take a look at how much you’ve contributed,” said Ryan Gubic, Certified Financial Planner and Founder of MRG Wealth Management in Calgary.

The end of the year is also a time to take a look at your budget and financial goals so you can project yourself into the future, he said.

“It’s important to understand what you’re trying to accomplish and how to prepare for 2022,” Gubic said. “Now is the time to put your ducks away. “

Financial experts recommend taking time over the holidays to collect receipts and bills for the year, for everything from childcare payments to moving expenses.

“A lot of people have moved in 2021,” said Paul Lynch, managing partner, National Tax Center, KPMG in Canada. “Now is a good time to dig up invoices and receipts… which could be considered moving expenses. “

Canadians who have worked from home will likely be eligible for home office deductions, Lynch said.

Although the simplified method for claiming a home office has been extended, he said some might want to calculate the numbers using the more detailed method to see what is more beneficial.

For Canadians who received income support from the federal government during the pandemic, experts say those benefits are taxable.

If it looks like you owe taxes, they recommend that you start saving now.

“These amounts are in fact taxable,” Lynch said. “It could have an impact on your cash flow once your taxes are due. “

Meanwhile, Canadians looking to purchase a new luxury vehicle may want to make the purchase before the end of the year.

The 2021 federal budget introduced a new tax on certain new luxury goods that is expected to apply from January 1, according to a KPMG Tax News Flash last month.

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