If you’re like most of our clients, tax planning may not be something that is high on your to-do list. However, the winter is a great time to review your personal finances and take advantage of tax planning opportunities that may be available to you

 

RRSPs

Your RRSP deduction limit is 18% of income earned in the previous year (to a maximum of $26,500 for 2019 and $27,230 for 2020); less any pension adjustments and unused contribution room and any pension adjustment reversal. You can find your RRSP deduction limit on your Notice of Assessment from the previous year or by logging into your CRA MyAccount online.

 

You have until March 2, 2020 to make RRSP contributions for the 2019 tax year.

 

Turning 71 this year? You have until December 31st to make an RRSP contribution and can contribute to a Spousal RRSP up until December 31st of the year your spouse turns 71.

 

 

RRIF Conversion

If you turn 71 in 2020 you have until December 31st to convert your RRSP into a RRIF. You need not worry here, as Linda Wilson will be reaching out during the summer months to all clients who turn 71 this year.

 

Once an RRSP is converted to a RRIF you must take out the minimum prescribed amount, which is taxable. If your spouse is younger than you, you can use his/her age to calculate your minimum amount. The lower the age, the lower the minimum amount and the less income tax you’ll pay on the withdrawal. See the link below for RRIF minimum payout percentages. 

 

https://www.woodgundy.cibc.com/en/reference/retirement-planning/rrif-minimum-withdrawal.html

 

If you’re over age 65 and don’t have any other eligible pension income, withdrawals from your RRIF qualify for the pension income tax credit. This means you can withdraw $2,000 per year from your RRIF tax-free!

 

 

TFSAs

The TFSA contribution limit for 2020 is $6,000 and there is no deadline for making a TFSA contribution.

 

It is important to remember that if you do make a TFSA withdrawal that you cannot recontribute, without having available contribution room, in the same calendar year. However, the amount you withdraw can be recontributed the following calendar year.

 

There are two methods to discover your TFSA contribution limit from CRA: 1) Login to your CRA MyAccount online and find it on the homepage, or 2) Phone into CRA at 1-(800) 959-8281 and select option 3 for Registered Plans and TFSAs. In both circumstances you will need to input your SIN along with a line amount from a recent tax return to verify your identity.

 

Past TFSA limits below.

 

* Cumulative amount assumes that one is 18 years or older in the year 2009.

 

 

RESPs

The annual deadline for RESP contributions is December 31st. With these post-secondary education savings plans the federal government provides a Canada Education Savings Grant (CESG) equal to 20% of the first $2,500 of annual RESP contributions or $500 annually, per beneficiary. If a beneficiary has unused CESG carry-forward room they can receive up to a $1,000 CESG annually (i.e. $5,000 x 20%) on the unused CESG.

 

You may only contribute a lifetime maximum of $50,000 per beneficiary to an RESP and the maximum total CESG available is $7,200.

 

 

Charitable Donations – consider making donations in-kind

If you’re going to be making charitable donations in 2020, gifting publicly traded securities with capital gains in-kind makes a lot of sense. You receive the full tax credit for the market value of the security donated, and eliminate the capital gains tax too!

 

Federal donation credits:

• 15% on the first $200
• 29% on amounts above $200 (33% to the extent taxable income exceeds $210,371)

 

Provincial donation credits are also available, and for those in the highest tax bracket in Ontario, the credit is approximately 50% (when combined with the federal credit) once donations exceed $200 in a calendar year.

 

December 31st, 2020 is the last day to make a donation and get a tax receipt for 2020. However, you should plan gifts in-kind well before year-end, to allow for sufficient time to make arrangements.

 

 

We view financial planning and portfolio management as mutually inclusive and are here to provide sound advice to ensure you achieve your financial objectives. Please get in touch if you have any questions.