Here are ten tax planning ideas to consider before year end:
1. Pay salary/bonus to the extent active business income exceeds $500,000 in your corporation.
2. Pay non-eligible dividends as the tax rate increases in 2014.
3. If your business or practice is not incorporated – seriously consider it as the tax deferral is significant (over 30% per year!).
4. If you have adult children, consider bringing them on as shareholders of your company and paying them dividends.
5. Sell securities with accrued losses to offset capital gains in the current and previous three years (December 24th is the last trade date).
6. Perhaps defer the sale of securities with large accrued gains until next year, but don’t necessarily “let the tax tail wag the dog.”
7. Make charitable donations and consider donating securities with accrued gains rather than cash to avoid tax on the gains.
8. Accelerate expenses – salary/bonus, medical, etc. to get the tax deduction or credit this year and look for ways to defer income into next year.
9. For family trusts, ensure income is either paid or payable (by resolution) to beneficiaries.
10. If you have minor children/grandchildren, consider RESP contributions to maximize the 20% government grant on contributions.
Please ensure you consult your tax advisor prior to implementing any tax planning strategies. Tax planning is one critical component of wealth management. Retirement, estate and succession planning together with investment management designed specifically to meet your objectives (not conventional benchmarks) must be integrated to effectively manage your wealth. That’s what we do at Newport Private Wealth. If you are not getting the service or results you are looking for, we would welcome the opportunity to help.
Enjoy the holidays!