2022 Year-End Financial To-Do List

Hard to believe but it’s already December! We are coming to the close of 2022 and that might mean that you need to act on some time sensitive financial strategies before December 31^st.

Depending on your circumstance, here are Five Strategies that you should consider investigating:

1. If you are between age 65 and 71 and have not already done so, consider setting up a small RRIF to take advantage of the Pension Income Credit.
2. If you have Non-Registered Investments which are in a loss position, consider selling the investment and applying that loss to any gains you might have accrued either this year or in the past 3 calendar years. You may be able to generate a refund on capital gains taxes previously paid in 2019, 2020 or 2021.
3. Set up or make and deposit to a Registered Education Savings Plan (RESP) in order to receive the 20% Canadian Education Savings Grant.
4. Business owner salary top-ups. If you are a business owner and wish to maximize CPP contributions, make sure you pay yourself at least $64,000 in 2022.
5. Charitable Contributions. In order to receive a tax deduction for 2022, your charitable contribution needs to be made before December 31, 2022.

1. Set up a Mini-RRIF between the ages of 65 and 71

Take advantage of the Pension Tax Credit by establishing a Mini-RRIF if you are over age 65. If you do not have other eligible pension income, you can take advantage of the pension income tax credit by electing to set up a mini RRIF. For example, for a 65-year-old, why not transfer $12,000 to an RRIF and draw out $2,000 annually for the next 6 years. This will maximize the pension tax credit. In Ontario, that could be a tax credit more than $400 per year.

2. Crystallize capital losses in non-registered accounts

If you own non-registered accounts some of your investments may be in a loss position. While this is not the goal of long-term investing, it is a reality that investments do go up and down in the short-term. For funds that are in a loss position, why not lock-in these losses so that they can be used to offset capital gains taxes you’ve previously paid or into the future. Simply switching the investment to a new investment can crystallize the loss. This loss can be used to offset a capital gain from 2019, 2020, 2021 or 2022. Applying the loss to a previously paid capital gains tax could create a refund in taxes previously paid. If you can’t use the loss in any of those past years, the loss can be carried forward to a future year’s capital gain.  

3. Set up or make and deposit to a RESP in order to receive the 20% Canadian Education Savings Grant

Your deposits to a RESP may be eligible for the 20% Canadian Education Savings Grant. However, there is an annual limit to the grant and you should make sure that you are managing your deposits so that you can maximize your eligible grants. The annual limit of contributions eligible for grant money is $2,500. However, if eligible, you can do one catch-up year making your potential limit $5,000.00. Contributions must be made by December 31^st.

4. Business owners’ salary top-up

Business owners may want to consider paying themselves at least $64,000 (the 2022 Yearly Maximum Pensionable Earnings YMPE) to maximize their Canada Pension Plan (CPP) contributions. The CPP can be a strong foundation of one’s retirement income and should be part of your retirement plan.

5. Charitable giving

For those considering a charitable gift, donate before the end of the year to receive the charitable donation tax credit for 2022. At the Federal level a $1,000 donation will create a $262 tax credit. At the provincial level the credit is about $150, depending on which province a person resides.

If you think any of these topics might apply to your situation, please call me at the number below or use the “Schedule a 20 minute phone call to learn more” button to schedule a call.