2017 YEAR-END TAX PLANNING CHECKLIST
Financial planning is time sensitive. While the following list is not exhaustive, here are some items that must be considered, incurred or paid prior to year-end in order to be included in your 2017 tax return.
Prior to December 15, 2017
If you owed in excess of $3,000 in tax upon filing your personal tax return for 2016, you may have received a notification from Canada Revenue Agency requiring you to pay tax installments in 2017. If you have not made these installments and will owe tax after source withholdings on salaries have been accounted for, you should make a payment by December 15. This will avoid installment interest being charged as a result of insufficient installment payments being made.
Prior to December 27, 2017
1. Calculate the capital gains that you have realized for 2017.
2. Identify and sell investments that are in a loss position. Trades entered by December 27 will settle funds in the account prior to December 31.
3. Net your capital losses against capital gains on your 2017 tax return.
Note: If your spouse has unrealized capital losses, extra steps can be taken to incorporate them in your tax planning.
In all cases, you should be aware of the superficial loss rules when employing these strategies.
Prior to December 31, 2017
- In British Columbia, the tax rate on personal income over $150,000 is scheduled to increase from 14.7% to 16.8% in 2018. Residents of that province should consider accelerating income into 2017 where the option exists.
- Contribute the maximum amount possible to your TFSA.
- Make charitable donations. Donating qualifying securities instead of cash can increase your tax savings.
- Contribute to your child’s RESP/RDSP.
- Withdraw funds from a TFSA, if needed. Any withdrawals in 2017 will be added to your contribution room in 2018.
- Consider withdrawing funds from your RRSP if you are in a low tax bracket for the 2017 tax year.
- If you are age 71 this year, you must convert your RRSP to a RRIF account and begin taking minimum withdrawals next year. Consider the following:
- Use your younger spouse’s age for minimum payment calculations.
- Make an advance contribution to your RRSP for earned income from this year.
- Pay all tax deductible expenses.
For January 2018
- Remember to pay interest on prescribed rate loans (e.g. spousal loans) prior to January 30.
For February 2018
- You have until March 1, 2018 to make your RRSP or a spousal RRSP contribution, and deduct the amount on your 2017 tax return (subject to your RRSP contribution limits).
Prior to December 31, 2017 for Corporations
- Consider paying an employee a non-cash gift or award of up to $500. This amount may be deductible to you and non-taxable to the employee.
- Consider declaring dividends for any amounts borrowed from the corporation if you have a tax year ending on December 31. If you have a year ending on December 31, declare the dividend after the calendar year to defer personal tax by one year.
- Consider paying dividends to non-contributing family shareholders in lower tax brackets prior to December 31, 2017 as a reasonableness test may be applied to those dividends going forward.
Ongoing reporting obligations
- If you hold foreign property with a cost base greater than $100,000, file the Foreign Income Verification Statement (CRA Form T1135). As of June 2014, new rules apply to the disclosure of this information.
- If you are a U.S. person for tax purposes, understand your IRS reporting requirements. U.S. Persons (even those who are resident in Canada) have tax reporting requirements in the U.S. For example, U.S. persons are required to report any holdings in Passive Foreign Investment Companies (PFICs).
Note: As of 2014, Canadian financial institutions are required to report certain information on U.S. Persons as a result of the U.S. Foreign Account Tax Compliance Act (FATCA).
- Any sale of a principal residence after 2016 is required to be reported on schedule 3 of your T1 personal income tax return. If the sale has not been reported, Canada Revenue Agency may deny the principal residence deduction which exempts the gain on these sales.
- Are you an executor? When completing the tax return for any estate with its first year-end occurring in 2016 and future years, ensure you elect on the first T3 trust tax return to be treated as a “graduated rate estate” to be eligible for individual graduated tax rates to apply for up to 36 months. Certain other restrictions apply. Speak to a tax professional to ensure this is completed correctly. If there are multiple wills, ensure you consult a tax professional to avoid inadvertently losing graduated rate estate status.
We recommend you discuss these strategies with your professional investment, tax and legal advisors prior to implementation to ensure they fit within your overall wealth plan. Contact us to get started!