December 2, 2019
2019 Year End Tax Planning Canada
As 2019 draws to a close you are probably holiday planning, but don’t forget to address your year-end tax planning as well.
Below, our Manning Elliott tax team has provided a list of tax deadlines that you should be aware of. These Canadian tax deadlines must be met by the end of 2019 or sometime in the first quarter of the new year.
On or before December 31, 2019
When determining the dividend/salary mix for owner-manager and other family members, keep the following in mind:
Whether the rules for the new Tax on Split Income (“TOSI”) will apply.
The salary/dividend mix depends on each recipient’s marginal tax rates, their desire to make RRSP contributions, and their utilization of tax credits such as the child care tax credit.
Salary payments to family members must be reasonable and the remittance of payroll taxes must be made on time.
Approximately $50,000 of eligible dividends can be received by an adult family member with little or no tax if that family member has no other sources of income and the new TOSI rules do not apply.
Dividends may need to be paid to avoid certain tax attribution rules. You can read more about “Income Attribution” and “Capital Gain Attribution” in our blog entitled, Gifting or Real Estate to Family Members in Canada.
Make donations of cash or shares
Donations of listed securities such as public company shares or mutual fund units with inherent gains are very tax efficient. The capital gain is not taxable, and the amount donated is equal to the value of the shares at the time of the donation.
Make political contributions.
Pay for medical expenses.
Purchase and use capital assets if the business year-end is December 31, 2019.
Distribute income from family trusts to beneficiaries, after reviewing the application of TOSI rules.
Consider selling capital assets with inherent capital losses if large capital gains were realized in 2019.
Make RRSP contributions if an individual turns 71 in 2019 and is required to wind up their RRSP.
On or before January 1, 2020
Consider redemption of all or a portion of preferred shares received on an estate freeze, after reviewing upcoming shareholder cash needs and existing shareholder loan balances.
On or before January 30, 2020
Payment of interest on low-interest loans from non-arm’s length parties and employers.
On or before March 2, 20201
Make RRSP contributions.
Maximize TFSA contributions.
1 The deadline date is February 29, 2020, but as this falls on a Saturday the contribution deadline date is extended to March 2, 2020.
Please contact any member of the Manning Elliott Tax Team for assistance with year-end tax planning.
This content is believed to be accurate as of the date of posting. Tax laws are complex and are subject to frequent change. Professional advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.