New report helps Canadians unlock potential tax savings strategies before year end and offers timely advice to small businesses on proposed tax changes
TORONTO, Nov. 2, 2017 /CNW/ - CIBC (TSX: CM) (NYSE: CM) -- While tax planning should be a year-round affair, the window for Canadians to take advantage of certain tax savings is fast approaching, particularly for small business owners in light of the recent tax change proposals, says Jamie Golombek, Managing Director, Tax and Estate Planning, CIBC Financial Planning & Advice.
"We know that for most Canadians, their tax bill isn't top of mind until crunch time," says Mr. Golombek. "But, everyone – from investors to students and small business owners – can save money on their 2017 tax bills through various tax credits and benefits if they take certain steps before year-end. If you don't consider them by December 31st, it will be too late when you file your tax return next April."
In his new CIBC report, 2017 Year End Tax Tips, Mr. Golombek provides a comprehensive overview of some notable tax-planning opportunities that should be considered before the December 31 deadline:
- New deadline for tax-loss selling
- Charitable donations for first-time donors
- Home renovation tax credits
- Private corporation business owners
For investors, tax-loss selling to offset capital gains realized on other investments is an important tax savings strategy. New for 2017, Canada has adopted a shorter settlement period for equity and long-term debt market trades. This means that, rather than the previous three-business-day settlement period, trades are now settled in two business days. To ensure that your trade settles in 2017, your trade date must be no later than December 27, 2017.
Mr. Golombek adds that while it may be tempting to transfer an investment with an accrued loss to your Registered Retirement Savings Plan or Tax-Free Savings Account to realize the loss without actually disposing the investment, such a loss is specifically denied under current tax rules – and there are also substantial penalties for swapping an investment from a non-registered account to a registered account for cash or other consideration.
For private corporations, some of the recently proposed tax changes could impact income sprinkling and passive investment income earned within corporations. These changes could result in tax rates of more than 40% (depending on the province) when small business income is distributed as dividends to family members after 2017 and may be of particular concern for families that have implemented estate freezes.
"Business owners should seek specific advice from their tax expert to understand how the revised tax rules will impact them," says Mr. Golombek. "The tax environment is constantly evolving, which is why it is important for tax planning to be part of ongoing business planning. It will be particularly important to plan before year end for changes that are expected to be implemented in 2018, which may involve paying extra dividends to non-contributing family shareholders before January 1, 2018."
Federal and provincial tax credits for charitable donations can result in combined tax savings of up to 50% of the value of your gift in 2017. But, as Mr. Golombek points out in his report, 2017 is the last year you can claim the federal First-Time Donor's Super Credit (FDSC) if neither you nor your spouse or common-law partner has claimed the donation tax credit from 2008 to 2016. The FDSC provides an additional 25% tax credit on total monetary donations of up to $1,000.
"While many Canadians regularly donate to various charities, this tax credit can be an important consideration for millennials, many of whom are students or just joining the work force and may not have had the disposable income to make charitable donations in the past," says Mr. Golombek.
Many Canadians may not be aware of the tax credits available for home renovations related to accessibility for seniors and people with disabilities, he says. The non-refundable Home Accessibility Tax Credit is equal to 15% of up to $10,000 of expenses per year towards renovations that permit individuals to gain access to, or to be more mobile or functional within, their homes or reduce their risk of harm within their homes or from entering their homes.
Regardless of your tax situation, being mindful of the tax deadline and understanding tax credits and benefits with the support of an advisor can result in significant savings for many Canadians who may be paying out more than they should."
"The key to successful tax planning is to work with an expert to help you identify potential savings. It can result in significant savings for many Canadians who may be paying out more than they should," he says.
Mr. Golombek discusses in a video here the key takeaways from his report.
CIBC is a leading Canadian-based global financial institution with 11 million personal banking, business, public sector and institutional clients. Across Personal and Small Business Banking, Commercial Banking and Wealth Management, and Capital Markets businesses, CIBC offers a full range of advice, solutions and services through its leading digital banking network, and locations across Canada, in the United States and around the world. Ongoing news releases and more information about CIBC can be found at www.cibc.com/en/about-cibc/media-centre.html.
SOURCE CIBC - Consumer Research and Advice