In my last post, I spoke about keeping your financial house in order, going over the documents you need to review and update every year to stay on top of things. Today, I’d like to give you some specific ideas about what you can do to reduce your tax bill for 2017 as the year comes to an end.
2017 was a busy year in tax! The federal government has made a big show of going after private corporations. There will be lots of changes in 2018 as these new announcements are written into law. For this video, I’m going to focus on what we know now and what you can do today.
The year is wrapping up, you’re getting into gear for the holidays, maybe you’re even a little afraid at how quickly the year-end is approaching! So what can you do to keep a little more money in your pocket and give a little less to the government this year?
If you think you may not have paid enough tax over the course of the year, maybe you’re self-employed and had a good year, maybe you live in Quebec but work in Ontario so the withholdings on your salary don’t match up, or for any number of other reasons, then call your accountant or advisor. They’ll be able to help you calculate a rough estimate to make sure you don’t come up too short in April. Trust me, it’s better to know now that in March!
There are some really good websites to help you calculate this on your own, like the Grant Thornton Tax Planning Guide. I use that one all the time. I’ll put the link in the description below.
What else can you do to reduce your bill in April, or maybe get some money back?
Here are my 5 tips:
Manage your portfolio. If you have triggered some capital gains by selling stocks that have appreciated outside your RRSP and TFSA this year, consider selling off some stocks that have lost value, to offset the gains. If you’re still buying individual stocks, this is a good opportunity to start converting your portfolio to a more efficient ETF portfolio. My colleagues and I at PWL have done many videos, podcasts and blogs on this, so have a look around our website to learn more. I’ll put a couple links below to help you get started.
Two: Top up your RRSP! You have until March 1st 2018 to make your RRSP contribution and deduct it against your 2017 income. Don’t wait! Check your federal notice of assessment (that letter you got from the feds after filing your taxes in April last year) to find out how much room you have to contribute. No reason to wait for the February rush to get it in on time. If you earned over $145,000 in 2016, you can contribute at least $26,010 this year, or more if you’ve carried over room from past years.
Three: Be generous! Do some good by giving cash or securities from your non-registered portfolio before the end of the year. The tax credits will help reduce your tax bill come April. If you want to know more, watch my recent series on donations.
Four: If you did any renovations that improved the energy efficiency of your house, make sure you have all your receipts. The Rénovert tax credit has been extended in Quebec to March 2018. You’ll get 20% back on your Quebec tax return for amounts spent in excess of $2,500 and up to $10,000 in renovations. That’s up to $1,500 off your tax bill if you spent $10,000 or more!
Finally, if you’ve been asked to pay tax instalments, make sure you’ve paid them! Unless you’re absolutely sure that paying them would result in a refund in April, you don’t want to underpay your instalments. Revenue Quebec charges up to 16% interest on unpaid or underpaid instalment payments.
Many of your are probably wondering about the changes to private company taxation that Finance Minister Morneau recently unveiled. There are still too many unanswered questions to start advising on what to do about these. We’ll have to wait until the legislation is drafted to fully understand the implications. Rest assured that I will be doing videos on Private company taxation once there is more clarity on the new regime.
I hope this video has given you some useful ideas about how to reduce your taxes. I really appreciate any feedback or ideas you may have, so don’t hesitate to leave me a comment below.
Grant Thornton Tax Planning Guide: http://www.taxplanningguide.ca/