Major tax changes before the end of the year
The Canada Revenue Agency administers the personal tax year in accordance with the calendar year. That means the deadline to reduce your tax bill and contribute to most registered accounts is December 31, although one notable exception is the RRSP contribution deadline, which is typically early March of the following year.
“What do you need by the end of the year to ensure you get the best tax break or take advantage of the tax incentives you can take?” Quinlan said. “You would hate to find out in early January (that) you missed something.” Medical bills, charitable donations, child care expenses, or settling investment management fees are examples that can save you a few dollars during April tax season if the payments are date stamped 2025. For example, the higher the cumulative donations in a given calendar year, the more you benefit during tax season.
Another popular tax strategy timed to the end of the calendar year is tax loss selling, where money-losing investments in non-registered accounts can be sold to realize a loss that can then be used to offset capital gains, thus reducing the taxes owed for the investor.
The deadline to contribute to your first savings account, which allows contributions of $8,000 per year, is also aligned with the calendar year — and allows for tax deductions, says Shannon Lee Simmons, a certified financial planner and founder of the New School of Finance. However, the contribution space will be carried over to next year. “Anything that has a hard deadline, you need to talk to whoever is the professional in your life (before Dec. 31),” Simmons said. “Everything else can probably wait until the new year.”
But it’s okay if you can’t make time before the year ends, says certified financial planner Jessica Moorhouse. “Don’t worry about the little things if there are some tax breaks you could have gotten and you didn’t get them,” she said. “Let’s try again next year.”
Take stock of your finances in January
Once the holiday craziness is over and the new year has arrived, take some time to examine your finances, including your budget, goals, and assets. “Once you’ve done all the trades that need to happen, we go into forward-looking mode,” Simmons said.
She suggested thinking about what your income will likely look like for the year. For example, do you expect your income to be stable or is there uncertainty? “If you feel like your economic future looks a little uncertain this year, or if you’re nervous about your income, I would increase emergency bills,” Simmons suggested.
Article continues below advertisement
X
If there is any money left over after your basic bills and living expenses are covered, think about your broader priorities. If you have consumer debt, make paying it off a priority. Or start funding an emergency account if you don’t already have one, she said.
Focus on sustainable long-term financial planning
If you already have a decent emergency fund and no debt, that money can go toward other long-term plans, such as retirement, paying off a mortgage or saving a down payment, Simmons said. “But it’s the third priority,” she said. “We want to make sure we have no consumer debt and that our necessities are intact before we move on to those more exciting financial goals.”
Then set micro-timelines to track progress toward your goals and stay realistic. Often people set unreasonable expectations, such as never eating out or planning to contribute an exorbitant amount to their tax-free savings account every month.
“They inevitably fail because life is expensive, and then they give up the whole plan,” she said. “If we were realistic and made a plan that was sustainable from the start, the chance of failure would be much lower and it would be much better to stick to it,” said Simmons.
Receive free financial tips, news and advice from MoneySense in your inbox.
Read more news:
#Plan #Financial #Success #MoneySense