Make The Most Of Your Money In 2016
- As we begin a new year, here are my top 10 tax resolutions for minimizing your tax burden and maximizing your financial position in 2016.
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1. Contribute $5,500 to your TFSA for 2016. Last year’s TFSA dollar limit was $10,000 so if you didn’t maximize your 2015 contribution, you can still do that this year as well.
2. If you expect to be in a lower tax bracket when you retire than you are this year, consider making an RRSP contribution. While much of the focus over the next 60 days will be on the 2015 contribution deadline of Feb. 29, 2016, why not get a head start on your 2016 contribution. The RRSP limit for 2016 is the lesser of 18 per cent of 2015 earned income or $25,370.
3. If you’ve got kids under 18, be sure to contribute at least $2,500 to each child’s registered education savings plan (RESP) this year to take advantage of the $500 Canada Education Savings Grant. You may also be able to catch up on missed CESGs from prior years.
4. Consider opening up a registered disability savings plan (RDSP) for a family member with a disability. You can contribute up to $200,000 over the disabled beneficiary’s lifetime, which may be augmented by up to $90,000 in Canada Disability Savings Grants and Bonds.
5. Take advantage of the new “home accessibility tax credit.” If you’re a senior or a person with a disability (or family member who lives with them), you may be able to claim then new HATC credit, worth up to $1,500, which was announced in the 2015 federal budget, and starts in 2016. It’s a non-refundable credit that provides federal tax relief of 15 per cent on up to $10,000 of eligible expenditures per calendar year, per qualifying individual.
6. While income splitting for families, known formally as the Family Tax Cut, was eliminated for 2016, you may still be able to do some income splitting by taking advantage of the historically low prescribed rate. If you have a spouse, partner or kids in a lower tax bracket than you, consider a prescribed rate loan strategy whereby the higher-income spouse or partner loans funds to the lower-income spouse or partner to invest at the record low prescribed rate, which is at one per cent until at least March 31.
7. When planning your charitable giving for 2016, consider donating appreciated securities directly to your charity of choice and eliminating tax on any accrued capital gains.
8. If you’ve maximized your RRSP, TFSA and RESP contributions and have paid down all your debt, look into investing in a permanent life insurance policy. The tax rules are changing at the end of 2016, so now is the ideal time to purchase such a policy to maximize the tax sheltering available within these products.
9. Make sure your will is up to date. If you haven’t updated your will in some time, why not resolve to have it reviewed in 2016 to ensure that it still jives with you testamentary wishes.
10. Plan now to avoid a tax refund next spring. If you regularly get a large tax refund each spring, consider applying for a reduction of tax at source using CRA Form T1213. Unfortunately, this needs to be repeated annually.
Jamie Golombek, CPA, CA, CFP, CLU, TEP is the Managing Director, Tax & Estate Planning with CIBC Wealth Advisory Services in Toronto.