Another year is essentially over, but there is still time to get a couple financial items off your to do list before the year end. While there are lots of things to do when it comes to personal finance, there are a few that are time sensitive and have annual deadlines. Here are some items you’ll want to check off your list before December 31st.
If you’re planning on making a withdrawal from your Tax Free Savings Account (TFSA) in the near future, it might be worth doing so before December 31st. This is because you have to wait until the following calendar year to re-contribute that withdrawal (assuming you have no other contribution room left). If you made a withdrawal of $15,000 on January 1st, 2019, you’d have to wait until January 1st 2020 to put that money back in if you also plan on contributing the maximum new room each year. If you made the withdrawal on December 31st you could put the money back a full year earlier, on January 1st 2019. If you weren’t planning on making a withdrawal from the TFSA, you can ignore this suggestion.
While the deadline to contribute to the Registered Retirement Savings Plan (RRSP) and have the deduction apply to 2018’s tax year is March 1st, 2019 (i.e. within the first 60 days of the year), starting to plan a contribution now might be helpful to make sure you have cash available by the deadline. Unlike RRSP contributions, if you have the ability to contribute to a Defined Contribution plan and benefit from an employer match, contributions have to be made by the end of the year.
Assuming your child has accumulated grants available, making a contribution to an RESP before the end of the year may provide a higher chance of maximizing the grants available for saving towards your child’s education. There is only a limited amount you can catch-up on grants each year, so saving a calendar year earlier within an RESP provides you with more time to catch up.
If you’re planning on making an RRSP withdrawal, determine which calendar year it would be more beneficial from an income tax perspective to withdraw from the RRSP. For example, let say you’re planning on making a withdrawal and your taxable income for 2018 is $10,000 but next year it will jump to $50,000. It would be more beneficial to withdraw from the RRSP in the calendar year when your income is lower. Like the TFSA suggestion, if you’re not already planning on making a withdrawal, you can ignore this suggestion.
Donating to charities or political parties before December 31st allows you to claim the donation on your 2018 tax return. If you wait until January, you’ll have to wait an extra year to claim the credit on your taxes. The same goes for other claimable expenses, like medical expenses.
When it comes to investing in non-registered accounts, there are two things to consider doing before the end of the year. The first is tax-loss-harvesting. This is where you’ve lost money in an investment (on paper) but still want to hold onto it or something very similar. Tax Loss Harvesting involves locking in that loss by selling the investment. Unfortunately, if you buy it right back (or within 30 days), you’ll get hit with the superficial loss rules which means you don’t actually get to claim the loss. Assuming you do it properly (be sure to read the white paper), you can use the loss you’ve crystalized against other investment gains in the current year, in the previous 3 years, or carried forward indefinitely.
The second thing you can manage is capital gains taxes. There may be reasons why you want to crystallize capital gains this year: you have losses to use against them, you’re in a low tax bracket, or you’re looking to sell something with very large capital gains, and spreading the sale out over two years will reduce your taxes. If that’s the case and you want the gain to be considered 2018 income, you’ll have to make the trade by December 27th (so it settles by December 31st).
Finally, there might be some work-related finance to do’s that should be done before the end of the year. If you have expenses related to your work, getting them in by the end of December, or before your company closes their books for the year will ensure that you’re reimbursed for your expenses.
If you have health benefits, like massages and other services, use those before you lose them. Most benefits work on a calendar year schedule. Make sure you submit the expenses on time too so that they are reimbursed and you don’t have to pay as much out-of-pocket.
