Article content material

Most of us solely take into consideration our taxes come tax season, which is often the 2 months main as much as the April 30 annual submitting deadline, nevertheless it’s actually the final two months of the calendar 12 months when taxpayers must be paying consideration.

In spite of everything, there’s toddler can do as soon as the 12 months is over to retroactively reduce taxes. Right here are some things you could want to take into account implementing earlier than year-end which can be distinctive to 2023 tax planning.

Article content material

Article content material

Tax-loss promoting

Now will be the opportune time to set off some tax losses provided that the actual property, communication companies and utilities sectors are down between 12 per cent and 15 per cent 12 months up to now in 2023.

Tax-loss promoting entails promoting investments in your non-registered accounts which have accrued losses to offset capital positive aspects realized elsewhere in your portfolio. Any web capital losses that can’t at present be used could both be carried again three years or carried ahead indefinitely to offset web capital positive aspects in different years.

To ensure that your loss to be instantly out there for 2023 (or one of many prior three years), the settlement should happen in 2023. The commerce date should be no later than Dec. 27 to finish settlement by year-end since Dec. 30 and 31 fall on a weekend in 2023 and there’s a two-day settlement interval for inventory trades.

For those who bought securities in a international foreign money, resembling in U.S. {dollars}, the acquire or loss could also be bigger or smaller than you anticipated as soon as you’re taking the international alternate part under consideration, particularly in case you bought these securities some time in the past.

Article content material

Article content material

For instance, a decade in the past, the U.S. greenback was buying and selling for round $1.05, whereas in the present day it’s hovering round $1.39. A safety bought 10 years in the past in U.S. {dollars} might due to this fact have a big embedded foreign money acquire, which might greater than offset what at first look would possibly look like an accrued loss.

First dwelling financial savings accounts

This week, the federal government introduced that greater than 250,000 Canadians have already opened a tax-free first dwelling financial savings account (FHSA) to save lots of for a down cost on their first dwelling. For those who’re a first-time homebuyer (no dwelling within the present 12 months or prior 4 calendar years) who’s a resident of Canada and no less than 18 years of age, the FHSA means that you can save on a tax-free foundation in direction of the acquisition of a house. That is the primary 12 months the FHSA has been out there.

You’ll be able to contribute as much as $8,000 per 12 months (as much as a lifetime restrict of $40,000) in direction of saving on your first down cost. You’ll be able to declare a tax deduction for contributions you make by Dec. 31 in your 2023 tax return, otherwise you would possibly select to assert it in any future 12 months when maybe you might be in the next tax bracket. Notice, nevertheless, that in contrast to RRSPs, contributions you make inside the first 60 days of 2024 can’t be deducted in your 2023 return.

Article content material

Withdrawals to buy a qualifying dwelling, together with withdrawals of any funding revenue or development earned within the account, are non-taxable, identical to they’re with a tax-free financial savings account (TFSA). If you find yourself not with the ability to use the FHSA to purchase a primary dwelling, you’ve the choice (till age 71 or 15 years after opening an FHSA, whichever comes first) of transferring funds from an FHSA to your RRSP or registered retirement revenue fund (RRIF) on a tax-free foundation. These transfers received’t have an effect on your RRSP contribution room. Funds in your RRSP or RRIF shall be taxed upon final withdrawal.

To acquire a 2023 tax return deduction, FHSA contributions should be made by Dec. 31, 2023. Even in case you can’t put in the entire $8,000 this 12 months, it’s nonetheless sensible to open an account in 2023 with some stage of contribution, as any unused room will carry ahead to subsequent 12 months. However in case you don’t open an account this 12 months, FHSA room doesn’t begin to accumulate.

As of Nov. 1, FHSAs can be found at greater than 20 monetary establishments, and extra establishments are working towards a launch quickly.

Various Minimal Tax

Article content material

You might need to get forward of proposed modifications to the Various Minimal Tax (AMT) system which can be set to take impact Jan. 1, 2024.

The AMT imposes a minimal stage of tax on taxpayers who declare sure tax deductions, exemptions or credit to cut back the tax that they owe to very low ranges. If the quantity of tax calculated beneath the AMT system is greater than the quantity of tax owing beneath the common tax system, the distinction owing is payable as AMT for the 12 months.

The 2024 AMT modifications embrace elevating the AMT price, growing the AMT exemption and broadening the AMT base by limiting sure exemptions, deductions and credit that scale back taxes.

Your AMT could also be larger in 2024 (in comparison with 2023) in case your taxable revenue is greater than about $173,000, and you’ve got revenue taxed at decrease charges than strange revenue, or deductions or credit that scale back taxes payable. These embrace capital positive aspects, worker inventory choices, Canadian dividends, unused losses carried ahead from prior years, sure deductions resembling curiosity expense, and non-refundable tax credit.

Because of this, in case you assume you could be affected in 2024, you could want to take into account triggering a acquire or exercising worker inventory choices in 2023 earlier than the brand new AMT rule comes into impact.

Article content material

Lastly, in case you plan to make important charitable donations, two proposed modifications for 2024 AMT calculations might have an effect on you. Solely 50 per cent of the donation tax credit score shall be allowed when calculating AMT (100 per cent is at present allowed).

Additionally, in case you make in-kind donations of publicly listed securities, or a donation is made on the train of a professional worker inventory choice of publicly listed securities, 30 per cent of capital positive aspects on these securities could be added to revenue when calculating AMT (versus zero in 2023).

Be sure you seek the advice of a tax adviser within the subsequent couple of months to gauge whether or not the AMT might have an effect on you in 2024 and, if that’s the case, take into account making a charitable present in 2023 relatively than 2024. On this regard, a donor-advised fund supplied by some public foundations permits a donor to get a donation receipt in the present day, after which direct the funds to any registered charity for years to return.

Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Property Planning with CIBC Non-public Wealth in Toronto. Jamie.Golombek@cibc.com.

Editor’s word: Jamie Golombek has been named a 2023 CPA Ontario Fellow, which is the very best distinction that may be bestowed upon a CPA. Congrats, Jamie.

For those who preferred this story, join extra within the FP Investor e-newsletter.

Article content material