Last Minute Tax-Saving Tactics in "3D"

Last minute tax-saving tactics in 3D

The most effective way to save the most on your personal taxes is to make tax-planning a year-round activity. But, life is life, and things – like tax-planning – do slide. Even so, you still have time to use tax-saving tactics like these to reduce your 2010 taxes.

Look at tax-planning in 3D.

By following the 3 D's of tax-planning, the savings will jump out at you.

Defer – by deferring tax you have more of your own money working for you.

 RRSPs -- You must wind up your RRSP account in the year you turn 71. If you have earned income, you can continue making contributions to a spousal RRSP until your spouse reaches 71.
 Home purchase – If you intend to make a RRSP withdrawal under the Home Buyer’s Plan consider doing so after December 31 to extend the period during which you can buy your new home, to extend the period for first repayment by an additional year, and provide an increased period for multiple withdrawals.
 Delay the sale of investments with capital gains until 2011 to defer tax on them. Alternatively, sell money-losing investments by December 31 and create capital losses that can offset capital gains – but be aware of the superficial loss rules.

Divide -- save by income-splitting through a spousal RRSP, paying a salary to eligible family members or pension income splitting with a spouse.

Deduct -- be sure to take advantage of every tax deduction and tax credit available to you and make the most of them by:

 Pooling medical expenses on the tax return of the lower earning spouse.
 Combining the medical expenses of each spouse.
 Pooling charitable donations or carrying them forward for up to five years to surpass the $200 threshold that increases your credit.
 Using the spousal credit for the higher-earning spouse.
 Transferring the age, disability, pension income credit, tuition and/or education credits to a spouse or supporting relative when not used by a dependent.
 Don’t forget the children’s fitness, first time homebuyer and moving expenses credits.
 If you’re self-employed and/or a business owner purchase capital assets before year end to speed up tax-write offs and make any tax-free gifts to employees.
 Move to a province with a lower tax rate before December 31 and you’ll pay the lower rate for the full year. Delay moving to a province with a higher tax rate until 2011.

You’ll take full advantage of tax-saving tactics like these – and a whole lot more – when you talk to your professional advisor before year end.

This article presents general information only and is not a solicitation to buy or sell any investments. Contact a financial advisor for specific advice about your specific financial circumstances.