Tax and investment planning tips for 2018 year end

December 5, 2018 Michelle Seymour


Tax and investment planning tips for 2018 year end

With 2018 soon coming to a close, it’s time to start thinking about year-end tax and investment planning. Outlined below are three planning opportunities that you may wish to consider this December.

Charitable donations

To be eligible to receive a tax credit for the 2018 tax year, charitable donations must be made by December 31, 2018. A taxpayer can claim donations up to 75% of his or her net income in any year. Any amount not utilized in the year can be carried forward and claimed in any of the five subsequent years.

For Alberta resident individuals, the 2018 combined federal and provincial charitable donation tax credits will represent 25% on the first $200 donation in the year, 50% on donations in excess of $200 (where the taxpayer is not in the top federal marginal tax bracket) and 54% on donations in excess of $200 (where the taxpayer has sufficient income above $205,842).

TFSA withdrawal planning

If you anticipate accessing money from your TFSA in early 2019, it may make sense to withdraw the funds before the end of 2018. This will allow you to maximize your 2019 TFSA contribution room which will be relevant if you anticipate having funds available to re-contribute to your TFSA in 2019. Your 2019 TFSA contribution room will be made up of:

  • the annual TFSA dollar limit ($6,000 for 2019); plus
  • any unused TFSA contribution room from the previous year; plus
  • total amount of withdrawals from TFSA’s in the previous year (excluding qualifying transfers and withdrawals of TFSA “excess”).

Tax loss selling

Selling an investment for a capital loss is often referred to as tax loss selling. Capital losses may only be used to offset capital gains, not to reduce other income. Investments should not be sold just to trigger a tax loss. Selling securities at a loss should only be done as part of an overall investment plan and if you no longer have a reason to hold the security.

Tax loss selling only applies to investments held outside of registered plans. Consideration should also be given to the superficial loss rules

In order to realize losses in 2018, trades must be made on or before December 27, otherwise the trade will not settle until 2019 and the loss won’t be available until the following year.

Get in touch with an ATB Wealth financial advisor to learn more about these year-end tax and investment strategies.
The information provided in this article is a simplified general summary and is not intended to replace or serve as a substitute for professional advice. Professional tax advice should always be obtained when dealing with taxation issues as each individual’s situation is different. This information has been obtained from sources believed to be reliable but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. This information is subject to change and ATB Securities Inc. (Member Investment Industry Regulatory Organization of Canada and Canadian Investor Protection Fund), ATB Investment Management Inc. and ATB Insurance Advisors Inc. reserves the right to change the information without prior notice, and does not undertake to provide updated information should a change occur. ATB Financial, ATB Investment Management Inc., ATB Securities Inc. and ATB Insurance Advisors Inc. do not accept any liability whatsoever for any losses arising from the use of this document or its contents.
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