Are you ready for the end of 2012?

December 10, 2012 at 4:37 PM

Some 2012 year-end tax planning tips include:

1.    Certain expenditures made by individuals by December 31, 2012 will be eligible for 2012 tax deductions or credits including: moving expenses, child care expenses, safety deposit box fees, charitable donations, political contributions, medical expenses, alimony, eligible employment expenses, union professional or like dues, carrying charges and interest expenses, certain public transit amounts, and children’s fitness and arts amounts.

2.    You have until March 1, 2013 to make tax deductible Registered Retirement Savings Plan (RRSP) contributions for the 2012 year.

       Consider contributing to a spousal RRSP to achieve income splitting in the future.

3.  If you own a business, consider paying a reasonable salary to family members for services rendered to the business.

4.  An individual whose 2012 net income exceeds $69,562 will lose all, or part, of their old age security.

     Senior citizens will begin to lose their income tax age credit if net income exceeds $33,884.

     Contact your professional advisors for assistance in managing 2012 personal income.

5.  Consider purchasing assets eligible for capital cost allowance before the year-end.

6.  Consider selling capital properties with an underlying capital loss prior to the year-end if you had taxable capital gains in the year, or any of the preceding three years.  This capital loss may be offset against the capital gains.

7.  Registered Education Savings Plan (RESP)

     A Canada Education Savings Grant (CESG) for RESP contributions will be permitted equal to 20% of annual contributions for children (maximum $500 per child per year).

8.  Health and dental premiums for the self-employed

     Individuals will be allowed to deduct amounts payable for Private Health Service Plan coverage in computing business income provided they meet certain criteria.

9.    A refund of Employment Insurance paid for non-arm’s length employees may be available upon application to CRA.

10.       Taxpayers that receive eligibledividends from private and public corporations may have a significantly lower tax rate on the dividends.  Notification from the corporation to the shareholder is required.

11.   Eligible public transit passes will be entitled to a tax credit.

12.   A Registered Disability Savings Plan may be established for a person who is eligible for the Disability Tax Credit.  Non-deductible contributions to a lifetime maximum of $200,000 are permitted which are eligible for tax-deferred grants and bonds.  Please contact your professional advisors for details.

13.   If required income or Forms have not been reported in the past to the CRA, a Voluntary Disclosure to the CRA may be available to avoid penalties.  Contact us for details.

Tax Tips & Traps 2012