There are only two months left until the end of the year. What steps can Canadians take to minimize their taxes?
Jamie Golombek, managing director of tax and estate planning at CIBC Wealth Advisory Services, says people need to meet with their advisors before the end of December to review their tax savings strategies.
He notes that the Liberals intend to cut the federal tax rate for the middle income-tax bracket from 22% to 20.5%, which will affect those who have taxable annual income between about $45,000 and $90,000. "The party also promised to increase the federal tax rate from 29% to 33% for individuals earning more than $200,000 annually," he says.
As a result, Golombek says middle-income earners may want to defer income to 2016 if they are able to do so; this could involve postponing bonuses or holding off on selling assets that have unrealized capital gains. They may also wish to claim certain expenses, such as for RRSP contributions, in 2015.
On the other hand, high income earners may want to trigger stock options since the Liberals have proposed to cap the related deduction on gains at $100,000 a year. "As it is unclear when this change may come into effect, employees holding significant stock options may want to consider exercising a portion of stock options in the near future," explains Golombek.
Finally, Golombek warns that those who are harvesting tax losses should pay attention to exchange rates, since the decline in the Canadian dollar could end up increasing capital gains, decreasing capital losses, or even turning what looks like a gain into a loss.
"If you purchased securities in a foreign currency, don't forget that capital gains are calculated in Canadian dollars – so currency fluctuations can be a key factor in determining whether you're in a loss position," he says.