Your year-end 2023 tax strategies

• December 31, 2023: deadline to benefit from government grants available in 2023.
• If you already have an RESP account, be sure to make the minimum contribution each year to maximize the Canada Education Savings Grant (CESG) and the Quebec Education Savings Incentive (QESI).
• Certain strategies should be considered to catch up on contributions from previous years. To learn more, talk to your wealth management advisor.
• If you have an RESP and your beneficiary is enrolled in a qualifying post-secondary program, consult your wealth management advisor to develop an appropriate disbursement strategy.

• February 29, 2024: deadline for contributions deductible for the 2023 taxation year.
• If you turned 71 in 2023 and earned employment, professional or rental income, you can make a final contribution to your RRSP in December, based on your 2023 income. This excess contribution will be subject to a penalty of 1% per month from the date of the contribution, hence the importance of making the contribution in December. In January 2024, you will have to file a tax form (T1-0VP) in order to calculate and pay the penalty. Despite the applicable penalty, this strategy can be beneficial since it enables you to maximize your use of the RRSP as a tax shelter.
• If you are older than 71 and your spouse is younger, you can still contribute to their RRSP until December 31 of the year in which they turn 71, as long as you have contribution room.

• $6,500: eligible contribution amount for 2023.
• Contribute the maximum amount to your TFSA annually. Although contribution room is cumulative over the years, you should take advantage of the fact that investments in a TFSA grow tax-free by contributing now. Plan for pre-authorized contributions and take your investment policy into account. Your wealth management advisor can help you plan your contributions and determine whether it would be worthwhile to contribute to your spouse’s TFSA.
• If you need to make a withdrawal from your TFSA in the short or medium term, do it in December of the current year rather than January of the following year. The total amounts withdrawn will add to the contribution limit for the following year, so you can replenish your account quickly, rather than having to wait a full calendar year, as would be the case for a withdrawal in January.

• Minimum withdrawal: At the end of the year in which you turn 71, your RRSP must be converted to an RRIF. You must begin making minimum withdrawals before the end of the year in which you turn 72. Know, however, that the withdrawal can be based on the age of your spouse, especially if that person is younger than you. The minimum withdrawal percentage will be based on your age, or your spouse’s age, at the beginning of the year of the withdrawal.

You could crystallize your latent capital losses by selling underperforming stocks to reduce the tax on a capital gain realized this year (or during the past three years, or to be realized in the future). Pay particular attention to the tax rules that may apply and ask your wealth management advisor about the suitability of this strategy in your situation.

You may be planning to invest in mutual funds late in the year. Some funds pay distributions that are taxable for the current year which can result in a substantial tax despite a short holding period. Find out about the payment of distributions before buying funds with a high tax impact.

If you buy a first home in December and you want to take advantage of the Home Buyers’ Plan (HBP) to withdraw an amount from your RRSP, postpone this withdrawal to January 2024. Since you have up to thirty days after the date of purchase to make the withdrawal, postponing it to January will enable you to defer by one year the time when your HBP repayments must begin, i.e. the second year following the withdrawal.

You may be thinking about buying a first home. A new registered account has been created for first-time buyers: the FHSA.

• This account allows you to contribute up to $8,000 per year, with a lifetime limit of $40,000, toward your purchase. The FHSA lets you accumulate tax-sheltered savings, just like the TFSA.
• You can even combine the HBP and the FHSA for your down payment.
• FHSA contributions are tax deductible, and deductions can be carried forward to a future tax year. This could have a positive impact on some of your tax credits or government benefits.

Ask your wealth management advisor now about the conditions for opening this account in order to optimize your contributions.