2021 has been a year we would like to forget. Drought, flooding, supply chain issues, COVID-19, etc. Despite this, please don’t forget to see your tax advisor before year end. As the year winds down review your finances and ask your advisor on ways to improve your tax position. Let me share with you some planning opportunities and choices for tax effective ways to keep your tax bill under control. I will briefly outline some planning ideas:

INCOME SPLITTING LOWERS FAMILY TAX BILL

Spousal RRSP - if one spouse earns more income, they can use their own RRSP contribution room to top up lower spouse’s RRSP.

Spousal Loan - higher earning spouse can loan money to lower earning spouse. Interest needs to be charged at the prescribed rate and paid within 30 days of year end. This interest is then written off by the higher income earner.

Pension Income – transfer up to 50% of pension income to lower income spouse.

TAX PLANNING STRATEGIES – FUTURE TAX RATES ARE EXPECTED TO INCREASE….

Increase Optional Inventory – increases future deductions.

Consider triggering unrealized capital gains - reduces future higher inclusion rates.

Defer RRSP contributions – use this write off on higher tax rates.

Immediate expensing of qualified capital purchases – available for CCPC’s

Timing of cash income – deferrals

Timing of purchases –pre-buying inputs

Top up TFSA – 2021 contribution up to $6,000

Optimizing deductions, tax credits and incentives

Converting non-deductible interest to deductible interest.

Remember tax deadline date of December 31 (excluding corporations without a December 31 yearend)

Work with your financial or tax advisor today to review your financial exposure to the various tax planning techniques. Remember, paying more tax than is absolutely necessary is legalized gifting to the government.

I look forward to next week when I'll be talking about Something Else!

Fred Mertz
Fred@thevoiceofagriculture.ca