What should I be focused on for year-end tax planning?
With the end of the year fast approaching, Canadian taxpayers will want to consider all the tax planning opportunities available to them. Which year-end planning strategies apply to you will depend upon your specific circumstances and objectives. The IG Wealth Management Year-end Tax Planning Checklist can help you understand what opportunities are most suited to you.
While you can make a RRSP contribution in the first 60 days of 2025 that can be used as a deduction on your 2024 tax return, most tax-related strategies must be implemented by December 31, 2024. Overall, the key to effective planning is being well-prepared. In this article, we’ll discuss key opportunities and strategies to consider.
Investment Planning Opportunities
Whether you have non-registered investments, registered investments or both, remember to review these accounts before the end of the year.
Budget 2024 announced an increase* to the capital gains inclusion rate from one half to two thirds for corporations and trusts and from one half to two thirds on the portion of the capital gains realized in the year that exceed $250,000 for individuals, for capital gains realized on or after June 25, 2024.
This increase in the capital gains rate has a significant impact on tax planning especially for individuals who will realize large capital gains and remuneration planning for shareholders with corporations.
If you have non-registered investments with unrealized capital losses, you may want to consider a strategy referred to as "tax loss selling”. Realized capital losses must first be applied against capital gains realized this year and can help individuals stay under the $250,000 annual limit If the capital losses exceed the current year recognized capital gains, they can be carried back to offset net capital gains realized in any of the three previous years (or forward indefinitely). Keep in mind this means that if you paid taxes on any net capital gains in 2021, realizing net capital losses in 2024 is your last chance to recover some of those taxes.
If tax loss selling is something you are considering, it’s important to be aware of a complicated set of tax rules that can potentially deny those capital losses. These rules are called the “superficial loss rules.” You can find more information on the superficial loss rules and tax loss selling here. Lastly, if you are considering this approach, we encourage you to speak with your accountant to ensure any losses you trigger can be claimed as intended.