2024 Year-End Planning

Maximize Your Tax Savings Before December 31st

As the year-end approaches, now is the time to review your financial situation and implement strategies to reduce your tax liability. At Accounting Plus Financial Services Inc., our tax specialists are here to guide you through the process. This newsletter highlights key considerations for employees, retirees, business owners, students, investors, and more.

 

For Employees

1. Maximize RRSP Contributions:
   • Deadline: March 3, 2025. Contribute up to 18% of earned income from the previous year (capped at $31,560 for 2024).
   • Example: If your 2023 income was $50,000, your contribution room would be $9,000.
   • Consider a spousal RRSP to split retirement income and save on taxes.
2. Employment Deductions:
   • Claim eligible work-from-home expenses, union dues, and professional fees.
   • Retain receipts for all eligible deductions and obtain a T2200 form from your employer if required.
   • Example: If you worked remotely for at least four consecutive weeks, you may claim home office expenses.
3. Deferred Income Planning:
   • Postpone bonuses or salary increases to 2025 if your 2024 income is nearing a higher tax bracket.
   • Discuss timing of significant payouts (e.g., bonuses) with your employer to manage tax implications.

For Seniors and Retirees

1. Optimize CPP and OAS:
   • Split CPP income with your spouse (if aged 65+).
   • Delay OAS payments if your 2024 net income exceeds $90,997 to avoid clawbacks.
   • Example: If your income is close to $91,000, deferring OAS can save you thousands in clawbacks.
2. Claim Medical Expenses:
   • Include unreimbursed expenses like prescription medications, dental care, and assistive devices.
3. Age Credit Eligibility:
   • Seniors with incomes below $44,325 can claim the age credit.
   • Review RRIF withdrawal strategies to minimize tax impacts.

For Business Owners

1. Immediate Write-Offs for Capital Assets:
   • Purchases made in 2024 are eligible for a 100% write-off under the Capital Cost Allowance (CCA) rules.
2. Dividend Strategy:
   • Pay dividends strategically to access refundable tax credits.
3. New Sale Incentives:
   • Explore Employee Ownership Trusts or the updated intergenerational business transfer rules for tax-efficient exits.
4. Corporate Tax Planning:
   • Retain earnings within the corporation to defer personal taxes but monitor passive income thresholds.
   • Example: If you’re selling your business, leverage the Canadian Entrepreneurs’ Incentive to shelter gains up to $1.25 million.

For Students

1. Tuition and Education Credits:
   • Claim unused credits and carry them forward for future use.
2. Loan Interest Deduction:
   • Deduct interest paid on student loans.
3. Part-Time Work Deductions:
   • Claim eligible moving or job-related expenses if you relocated for school or work.
4. Canada Education Savings Grant (RESP):
   • Receive up to $500 annually per child through RESP contributions.

For First-Time Homebuyers

1. Enhanced Home Buyers’ Plan (HBP):
   • Withdraw up to $60,000 from your RRSP tax-free to fund a first home purchase.
2. Tax-Free First Home Savings Account (FHSA):
   • Contribute up to $8,000 annually (lifetime limit of $40,000). Contributions are tax-deductible, and withdrawals are tax-free when used for home purchases.
3. Canada Greener Homes Loan:
   • Access interest-free loans of up to $40,000 for energy-efficient home retrofits.

For Investors

1. Capital Gains Strategy:
   • Trigger gains below $250,000 to take advantage of the 50% inclusion rate.
2. Offset Gains with Losses:
   • Use capital losses to offset gains and reduce taxable income.
3. Portfolio Restructuring:
   • Convert non-deductible interest (e.g., personal loans) into deductible investment interest.
4. Maximize TFSA Contributions:
   • An additional $7,000 room is available starting January 1, 2025.

Additional Tips for All Taxpayers

1. Charitable Donations:
   • Claim up to 75% of your net income for eligible donations.
2. Medical Expense Planning:
   • Bunch medical expenses into one year to maximize deductions.
3. Family Tax Planning:
   • Explore income splitting opportunities and RESP contributions for children.
4. Canadian Dental Care Plan:
   • Available for families with adjusted net income under $90,000.
5. Important Reminders:
   • Keep all receipts and documentation for tax-deductible expenses.
   • Review your 2024 tax installments and ensure they’re up to date.
   • Plan for significant life changes that may affect your tax situation.

Contact Us Today!

At Accounting Plus Financial Services Inc., our tax specialists are ready to help you maximize your tax savings. Whether you’re an employee, retiree, business owner, student, or investor, we’ll guide you through personalized strategies tailored to your unique needs.

Call us now or visit our website to schedule a consultation. Stay tuned for more updates on our social media channels.