As our American cousins celebrate over turkey this week, it is a reminder that December is on our doorstep. This means tight schedules, an over-booked social calendar and a general feeling of being rushed as the holiday season approaches. Forget missing items on the shopping list. This is also a month when important things can fall through the cracks, like making sure we have sorted out our investments and taxes. It is for this reason that we advise clients to get most of these things done earlier in the year, so they can be checked off before the rush ensues. As this is a relatively quiet week, due to the U.S. holiday, I thought we would do a quick review of the key items before we enter the last month of the year.

 

Let’s start with registered accounts – certainly an area where things can and should have been done months ago. If you have an RESP plan, either for an individual child or multiple children, contributions are always better made at the beginning of the year. Provided the child has not had the maximum lifetime contribution of $50,000 made, ensuring that you put in $2500 to get the maximum government grant for this year of $500 is key. Why should this have been done months ago? Simply because the capital you would have invested would have grown tax deferred for the entire year. Still, if you haven’t yet made your contributions, you have four weeks to get that done.

 

If you have an RRSP and haven’t made a contribution yet, not to worry as you have until the end of February to do so for this current tax year.  However, if you turned 71 this year, then your RRSP needs to be converted into a RRIF before the end of December. This is a fairly simple process, but it does require opening a new account and then transferring your RRSP assets into the RRIF before the end of the year. Leaving this to the last minute or, worse, forgetting to do so altogether, is going to add unneeded stress. Because of this, we always suggest getting the RRIF account opened and assets journaled early in the year so it can be checked off the list.  Note, we would do this after any available RRSP contributions have been made. This deadline for converting the RRSP also applies to situations where you have a LIRA or a locked-in RRSP.

 

On the tax side, there are a few things we want to tidy up before year-end.  First, if you make charitable donations and want to get the credit for those donations for the purposes of this year’s taxes, then they have to be made before the end of December.  Make sure the donation is date-stamped and that your charitable receipt shows that it was made this year. Remember that for many charities, you can also donate securities instead of cash. This is extremely useful in situations where you own a security that has a large unrealized capital gain and/or your portfolio has a higher degree of risk than what is appropriate or what you are targeting.

 

Speaking of capital gains, this is when you should review your transactions over the year and look to see if you have a net realized gain that is significant. If so, you or your advisor can look for any unrealized losses that can be triggered in order too partially or fully offset this gain. I have written about this several times, but remember that when we harvest tax losses, we need to do it in a manner that doesn’t overly distort the make-up of the portfolio, while adhering to the CRA rules around using tax losses.  It is also a good idea to consult with your tax professional to see if there were any realized gains in the past three years, as it is possible to trigger losses to go back and offset those as well.

 

This specific year-end is going to be very important for some Canadians given that the federal government’s new Alternative Minimum Tax (AMT) rules take effect in 2024 and may have implications for capital gains and even charitable donations. Our resident tax expert, Jamie Golombek, put together a  review of these rules, which can be found here.

 

Alternative minimum tax: What’s changing for 2024?

 

On behalf of the Pyle Wealth Advisory team, have a wonderful weekend and Happy Thanksgiving to all our American friends and family.

 

Andrew Pyle

 

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Andrew Pyle is an Investment Advisor with CIBC Wood Gundy in Peterborough. He and his clients may own securities mentioned in this column. The views of Andrew Pyle do not necessarily reflect those of CIBC World Markets Inc.