Invest Well. Live Well: Seven year-end planning tips

This time of year, many of us are making a list and checking it twice, but there are also a few financial checklist items that we feel you should consider:

1) Charitable giving: While charities require year-round generosity, the need seems to be more prevalent as the holiday season nears. In B.C., all donations after $200 qualify for a combined federal and B.C. non-refundable tax credit of 44 per cent. In short, you get more of a tax break with the more you give.

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• Donate profitable investments in-kind. Usually when you sell a security, you’re required to pay tax on 50 per cent of the capital gain. But if you transfer that same security directly to a charity, there will be no tax on the capital gain. You will get a donation credit for the full value, plus save paying taxes on the capital gain.

2) Tax-loss selling: Not all investments pan out. Consider selling an underperforming investment and use its loss to offset other gains, thereby lowering tax

A few quick points:

• Superficial loss rule: If you sell any investment at a loss, you must wait at least 30 days before buying it back in any family account; otherwise, the loss is denied for tax purposes.

• All trades must settle before year-end, which is Dec. 27, 2018.

• Losses can be carried back three years on tax returns or carried forward indefinitely.

3) Top up education savings: We believe registered education savings plans (RESPs) are great vehicles to save for kids and grandkids' education.

• The federal government provides a grant of 20 per cent on annual contributions of up to $2,500 per child and a lifetime limit of $7,200 per child. One could get $500 annually from the government.

• Generally, a subscriber can contribute up to Dec. 31 in the year a child turns 17.

• You can also make up for missed years. You can make a maximum $5,000 RESP contribution in one year and receive a grant of $1,000.

• Check with Service Canada on limits by calling 1-888-276-3624.

4) Income harvesting: If you are in a lower income tax bracket or have several tax credits available (e.g. medical expenses, age credits, dividends, etc.), it may make sense to draw more income before year-end. This can be done by:

• Harvesting capital gains from your portfolio (you could then use proceeds to top up your tax-free savings account [TSFA] if room is available).

• Withdrawing additional income from your retirement saving plan (RSP) or retirement income fund (RIF).

• Drawing more income from your business.

5) Withdrawal from your tax-free savings account: If you plan to use funds from your TFSA in 2019, consider drawing them out now. You are allowed to re-deposit funds the following calendar year after a withdrawal. In theory, you could replace funds early in 2019 by drawing them out now versus waiting another year if you withdraw in January.

6) Convert some of your RSP to RIF at age 65: If you are 65 and have no sources of pension income (CPP and OAS are not considered eligible pensions), you can withdrawal $2,000 from a RIF tax-free by using the federal pension credit. Do so by electing a partial transfer of assets from RSP to RIF, leaving the rest in RSPs until you turn 71. RSP withdrawals do not qualify.

7) Contribute to a registered disability savings plan (RDSP): These are tax-deferred saving plans available to Canadian residents eligible for the disability tax credit. Depending on the net income of the beneficiary's family, the government may contribute up to a maximum of $4,500 in grants and bonds per year of eligibility.

These are some considerations people can take advantage of before year-end. As always, please check with your tax professional before enacting any of the above strategies.

Until next time, invest well. Live well.

This document was prepared by Eric Davis, vice-president, portfolio manager and investment advisor, and Keith Davis, investment advisor, for informational purposes only and is subject to change. The contents of this document are not endorsed by TD Wealth Private Investment Advice, a division of TD Waterhouse Canada Inc.-Member of the Canadian Investor Protection Fund. All insurance products and services are offered by life licensed advisors of TD Waterhouse Insurance Services Inc., a member of TD Bank Group. For more information, call 250-314-5124 or email

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