Year-End Tax Planning: 10 Moves to Make Before December 31
The clock is ticking. Here are 10 tax moves you can still make before December 31 to reduce your tax bill for this year.
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Key Takeaways
- Accelerate expenses into this year if income is high
- Defer income to next year if in lower bracket then
- Maximize RRSP contributions (or set up for early year)
- Trigger capital losses to offset gains
- Review salary vs dividend mix for business owners
Time is Running Out
December 31 is more than New Year's Eve. It's the deadline for most tax planning strategies. Here's what you can still do.
Accelerate Business Expenses
Buy Now, Deduct Now
- Office supplies and equipment
- Prepay rent, insurance, or subscriptions
- Stock up on inventory
- Make required repairs
- Pay outstanding invoices to contractors
Defer Income (If Beneficial)
Push Revenue to January
- Delay invoicing until after year-end
- For corporations: Declare year-end bonus but pay in January
- Ask clients to pay in January if possible
- Farmers: Defer grain sales to next year
Maximize RRSP Contributions
Use Your Room
- Check contribution room on CRA My Account
- Deadline is March 1 for prior year deduction
- But contribute NOW if you have the cash
- Consider spousal RRSP for income splitting
Trigger Capital Losses
Tax-Loss Harvesting
- Sell losing investments to crystallize losses
- Losses offset capital gains from this year
- Excess losses carry back 3 years or forward indefinitely
- Beware "superficial loss" rule (don't repurchase within 30 days)
Salary vs Dividend Planning
Corporate Owner-Managers
- Review salary taken vs dividends paid
- Top up salary to maximize CPP and RRSP room
- Consider declaring dividend before year-end
- Balance personal vs corporate tax rates
Charitable Donations
Give Before Year-End
- Federal credit: 15% on first $200, 29% on amounts over
- Plus provincial credits
- Consider donating appreciated securities (no capital gains tax)
- Ensure receipt dated before December 31
Medical Expense Timing
Optimize Medical Claims
- 12-month period ending in tax year
- Bunch expenses into optimal period
- Get that dental work done now
- Fill prescriptions before year-end
TFSA Contributions
Tax-Free Growth
- No deduction, but tax-free growth
- Unused room carries forward
- 2024 limit: $7,000
- Recontribution after withdrawal: Wait until next year
Equipment Purchases
CCA Planning
- Equipment purchased this year starts CCA
- Immediate expensing available up to $1.5M
- Must be "available for use" - so get it delivered!
Review Corporate Year-End
December 31 Year-End Corporations
- Last day to pay bonuses (can accrue and pay within 179 days)
- Review GRIP/LRIP balances for dividend planning
- Consider year-end adjustments
Need Help With Year-End Planning?
Contact Tax Punjabi now - before December 31 arrives.
This article is for educational purposes only. Consult a professional for your specific situation.