2016 is upon us. It’s time once again to take advantage of the many personal and business tax-planning opportunities that are still available. This post provides numerous ways to save on taxes for 2015 and beyond.

Contribute to Your RRSP

The most popular tax tool available to taxpayers is investing in a registered retirement saving plan (RRSP).

Contributions to RRSP’s are tax deductible and the income earned within the plan grows tax deferred until retirement. You can claim a contribution of up to 18% of 2014 earned income to a maximum of $24,930. Earned income is defined as income from employment, from business, net rental income from real estate, CPP disability pension, certain types of royalty, and spousal or child support payments that are included in your income.

The contribution limit may be subject to the year 2014 pension adjustment reversals. Pension adjustments reflect, in most cases, your employer’s contributions to a pension plan or actuarial commitments to such plans in the year 2014. The age limit for contributing to an RRSP is 71. The age limit for converting an RRSP to an annuity or RRIF is also 71.

Don’t over-contribute; a severe penalty will be the result.

Eligible Deductions & Credits

If you pay the following expenses by December 31, 2015 they will be eligible for the deductions of credits:

  •  Childcare expenses
  • Children’s Fitness Expenses
  • Moving expenses
  •  Political donations
  •  Charitable donations
  •  Interest paid on loans used to purchase investments developmental fees
  •  Tuition fees
  •  Medical expenses
  •  Children’s artistic, cultural, recreational or developmental fees
  •  Deductible support payments
  •  Union and professional dues
  •  Accounting fees
  •  Investment counsel fees

 

Capital Gains Exemption Deduction

The lifetime capital gains exemption deduction, if you dispose of shares in a qualified small business corporation, is $813,600, or $1,000,000 for a qualified farm property or qualified fishing
property. If you have already claimed the $100,000 personal capital gain exemption (ended in 1994) then this reduces the available lifetime capital gains exemption. You must also verify whether you have claimed allowable business investment losses (ABIL) in prior years or have cumulative net investment losses (CNIL) as of December 31, 2015, as these items will also affect the amount of exemption that can be claimed.

Use Capital Losses

You can use your 2015 capital losses to reduce your current year’s income taxes by applying such losses against your 2015 capital gains. You must however be careful of the superficial loss rules preventing you from claiming a capital loss on an identical asset that you reacquired 30 days before or after the sale date.

If capital gains were realized in the years 2012 to 2014 and net capital losses were incurred in 2015 then you can carry these losses back against previous years’ capital gains. You can carry the unused 2015 losses forward to future capital gains.

The last 2015 transaction date effective for publicly traded securities is December 24, 2015

Other Tax Planning Issues

  • Consider a Registered Education Savings Plan (RESP) for your children.
  • Set up a Tax Free Savings Account (TFSA).
  • Review your December income tax installment.
  • Make a low interest loan to your spouse.
  • Repay outstanding shareholder loans and pay interest on employee loans.
  • Contribute to your spouse’s or common-law partner’s RRSP to the extent of your RRSP deduction limit for 2015. This doubles the amount a couple can withdraw for the Home Buyer’s Plan.
  • Consider a Registered Disability Savings Plan for a child with a sever disability.
  • Claim your personal tax credits.
  • Keep your transit passes.
  • Pay reasonable salaries to family members.
  • Convert non-deductible debt to deductible interest.
  • Review your will every five years.
  • Split pension income with spouse.
  • Home buyer’s tax credit for first time home buyer.
  • Consult your Padgett Business Services representative to obtain additional tax planning ideas.