AIC Limited

AIC Limited

December 06, 2006 12:37 ET

AIC Tax & Estate Planning Group Introduces Last Minute Tax Saving Ideas for 2006

BURLINGTON, ONTARIO--(CCNMatthews - Dec. 6, 2006) - As the 2006 year approaches its end, there is no better time than now to review your finances and take the necessary steps to reduce your tax burden for 2006. Here are a few last minute tax-saving suggestions:

Contribute to your RRSP

You have until Thursday March 1, 2007 to make a contribution to your RRSP that will give you a deduction on your 2006 tax return. Make that contribution sooner rather than later, in order to have your money working inside your RRSP longer. Even if you're not sure which investments to buy, contribute to your RRSP and "park" the cash until you've made a decision about what investments to hold in your RRSP. Be careful not to overcontribute too much to your RRSP, or you may have a personal tax penalty of 1% per month.

Borrow to contribute to your RRSP

The interest expense on borrowed money that is contributed to an RRSP (an RRSP loan) is not deductible for income tax purposes. However, an RRSP loan makes sense where the investment earnings in your RRSP are greater than the interest you are paying on the RRSP loan. You can also reduce your interest expense on an RRSP loan by paying down this loan with your tax refund.

Donate securities to charity

Making a donation by December 31 will provide you with a tax credit for 2006. If you're considering disposing of certain publicly traded securities anyway, think about donating those securities to a public charity. Any capital gains realized on securities donated after May 1, 2006 are not taxed, and you're entitled to a donation receipt for the full donation. Due to the changes enacted in 2006, the donation of appreciated securities now makes even more tax sense than a donation of cash, or selling the securities and donating the sale proceeds.

Convert at least part of your RRSP to a RRIF before year-end

Beginning in 2006, if you're 65 years of age or older, you are entitled to a pension credit to offset the tax on the first $2,000 of pension income annually (increase from $1,000), which includes any withdrawals from a RRIF. Consider setting up a RRIF that will pay you only $2,000 annually. This $2,000 of RRIF income is tax-free, thanks to the credit, if you're in the lowest marginal tax bracket and do not have any other pension income in the year.

Trigger accrued losses before year end

If you realized capital gains this year, or in one of the three prior years (2003, 2004, or 2005), consider selling any investments that have dropped in value in order to apply the capital loss against those earlier years' capital gains. Capital losses must be used to offset gains in the current year first, but excess losses can then be carried back up to three years or forward indefinitely.

Make expenditures before year-end

Certain payments should be made before December 31 to entitle you to claim a deduction from income for 2006. These may include: union dues, professional membership fees, child care costs, medical expenses, investment counsel fees, interest costs, alimony and maintenance, moving expenses, political contributions, transit pass expenses, deductible legal fees, safety deposit box fees, tuition costs and tax shelter costs.

AIC commenced operations in 1985 and has grown to become one of Canada's largest privately-held mutual fund companies with assets under management exceeding $9 billion.

Contact Information

  • AIC Limited
    Terri Oswald
    Director, Media Relations
    (905) 331-4242, ext. 4345 or 1-888-710-4242, ext. 4345