Newsletter Page 2 - Dean Constand - Toronto Certified General Accountant

Newsletter Page 2 - Toronto Certified General Accountant

Newsletter #6 December 2009

Personal Income Tax (Cont'd)

Year End Tax Tips (Cont'd)

Strategize the location of your investments inside and outside your RRSP. Remember that
income outside of your RRSP is taxable every year; consider transferring any highly taxed
interest bearing investments to your RRSP where income will be temporarily sheltered.
Keeping stocks outside your RRSP allow you to claim capital losses if they arise, and capital
gains to be taxed at lower rates than interest income (50% of gains are taxed as opposed to
100% of interest income).
If your stocks and investments have appreciated in value, consider the following strategies to
defer or minimize the capital gains tax on the sale of those investments:
1. Delay the sale of those appreciated investments until after year end; the capital gains
  tax won’t be payable until April 2011, when you file your tax return for 2010.
2. If you have capital losses, you may want to sell those appreciated investments before
  year end to use up those losses and reduce the tax on the gains; capital losses can
  only be used to offset capital gains.
If your stocks and investments have depreciated in value, consider the following strategies
to reduce or recover taxes paid on gains realized from the sale of investments:
1. Trigger capital losses from the sale of those depreciated investments before year end
  to offset capital gains realized during the year or in the prior three years; carrying back
  a capital loss triggered in 2009 to capital gains that were generated before the
  economic downturn, say in years 2006 and 2007, or even 2008, can generate a nice tax
  refund for you come April.
2. Trigger capital losses from gifting those depreciated investments to your minor children
  (under 18 years old) before year end to offset your capital gains realized during the
  year or in the prior three years; if the investment grows in value, and it is sold by your
  child, it will be taxed in the child’s hands at a lower marginal rate than yours. Note that
  this only applies to gifting to a minor child, not a spouse.
Consider reinvesting sales of stocks or investments that you have triggered above in your
Tax-Free Savings Account (TFSA) to the extent of your unused TFSA contribution room; future
gains from these investments earned in your TFSA would be tax-free.
Consider a home renovation before February 1, 2010 in time to claim the home renovation
credit in your 2009 income tax return.
If you own a business, and your fiscal year end is a calendar year end, make a computer and
equipment purchase before December 31 (computer and software acquired after January 27,
2009 and before February 2011 are 100% deductible in the year purchased) so you can get the
deduction sooner than if you waited until the start of next year.
Donating to charities by year end – donating to a charity by year end is worth about 21% in
tax savings for a donation under $200, and about 40% in excess of $200. When I prepare your
personal tax return, I combine your spouse or common law partner’s donations with yours so
the total is more than $200 to benefit from the higher tax savings. Consider donating publicly
traded securities to a registered charity – any resulting capital gain on the securities donated is
not subject to capital gains tax and you’re entitled to a donation receipt for the full value of the
securities donated.

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Tax Tips