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BMO Nesbitt Burns

November 27, 2010 09:00 ET

REPEAT-Media Advisory: Don't Wait Until April-BMO Nesbitt Burns Looks at End of Year Tax Tips for Canadians

December 31st Deadline Looms for Canadians Wanting to Reduce Their Taxes on Investment Income

TORONTO, ONTARIO--(Marketwire - Nov. 27, 2010) - While Canadians usually associate tax season with spring time, considering investment tax saving strategies well in advance of the tax filing deadline can maximize savings for 2010. 

According to John Waters, Manager, Tax Planning, BMO Nesbitt Burns, waiting until the new year to start thinking about taxes is too late, because many of the cut-off dates that can lower taxes fall at the end of the calendar year.

"There are many tax-saving strategies, some very simple, that Canadians can use to realize tax savings if these strategies are undertaken before the end of 2010," said Mr. Waters. "The best strategy is to educate yourself on the options available to you, and plan ahead."

A recent Nesbitt Burns survey found that more than three-quarters of Canadians do not take tax implications into consideration when investing and almost 40 per cent are unsure if they are taking advantage of all tax incentives available to them.

John Waters Suggests the Following Five Year-End Tax-Saving Strategies:

1. Previous Year Tax Payment Installments – Deadline: December 15, 2010

  • If an individual's estimated income tax payable for the year, or his/her income tax payable for either of the two preceding years exceeds $3,000 ($1,800 for Quebec residents), he/she may be required to pay income tax installments. Personal tax installments are due four times a year, with the final installment due December 15. 
  • Canadian investors are often required to make installments since tax is not deducted at source on investment income. So investors who fall short on any of their installments could incur non-deductible interest. Now is a good time to revisit the installments made to date to determine if a top-up is required.

2. Tax-loss Selling – Deadline: December 24, 2010

  • If Canadians have investments that have depreciated in value, they can sell these investments before year-end to offset capital gains realized earlier in the year and reduce their overall tax bill.
  • It is important to ensure that a sale makes sense from an investment perspective since stocks sold at a loss cannot be repurchased until at least 30 days after sale to be effective, so be sure to work with your BMO Nesbitt Burns advisor as well as your tax advisor in implementing this strategy.

3. Charitable Donations – Deadline: December 31, 2010

  • Instead of donating cash to charities, investors should consider donating appreciated publicly-traded securities, which can provide a tax credit equal to the value of the securities donated. Doing this could also potentially eliminate the capital gains tax otherwise payable on the gain accrued on the security. Ensure all charitable donations are made before December 31 in order to receive a tax receipt for 2010.
  • December 31 is also the final payment date for a 2010 tax deduction or credit for expenses such as childcare, medical tuition and alimony payments.

4. Dividend Income – Deadline: December 31, 2010

  • Personal tax rates on eligible dividends were increased in 2010, with further rate increases occurring in 2011 and 2012. In light of these recent changes, investors should review their portfolios to determine if any changes to their investment mix are warranted. 

5. RDSP Contributions – Deadline: December 31, 2010

  • The Registered Disability Savings Plan (RDSP) is designed for individuals with disabilities and combines the advantages of tax deferred investment growth with the opportunity to receive government subsidies. The deadline for plan contributions each year is December 31.

Mr. Waters is also available to discuss:

  • Tax planning essentials:  Basic tips and simple advice that all Canadians can take advantage of when it comes to understanding how their investments are taxed, including how to avoid common tax filing errors.
  • Investment tax planning:  What you need to know about the taxation of your investments, including registered and non-registered accounts.
  • Addressing misconceptions: Understanding some common misconceptions held by Canadians when it comes to investments and taxation issues.

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