The end of the year is approaching, but there is still time to implement tax optimization strategies. Here are some tips to help you reduce the taxes you have to pay in 2024.
The tax authorities provide taxpayers with several credits and even some tax assistance to help you reduce your next tax bill. Gino Gosselin, tax partner at Raymond Chabot Grant Thornton, summarizes some of them.
1. Contribute to your or your spouse’s RRSP
Contributing funds to your RRSP helps reduce your taxable income and therefore your tax bill. “In order to benefit from this credit in the tax return for the 2023 tax year, a payment is possible until March 1, 2024. But be careful: if you turn 71 in 2023, your deposit must be made before December 31, 2023,” he warns.
Are you 71 or older and earned qualifying income in 2023? Because of your age, you can no longer contribute to your RRSP. On the other hand, if your spouse is younger than you, it is still possible to contribute to their RRSP through December 31 of the year they turn 71.
2. Deductible of $2,000
Did you know that it’s possible to contribute $2,000 more to your RRSP without paying a penalty? “In order to be able to deduct these amounts, however, you must generate sufficient qualifying income in the coming years,” mentions Gino Gosselin.
Good to know: If you need to convert your RRSP to an RRIF this year because you turn 71 in 2023, you will be eligible for an increased RRSP deduction when you make an excess contribution to your RRSP in December 2023 your next tax return.
3. RRIF withdrawals
“If your income is low in 2023, you should consider making a withdrawal from your Registered Retirement Income Fund (RRIF) before the end of the year to increase your income and avoid losing certain deductions or non-tax credits. refundable,” recommends Gino Gosselin.
Are you at least 65 years old? Purchasing an annuity or RRIF could allow you to claim the retirement income credit.
4. Pay your bills in 2023 and request your receipts
You have until December 31, 2023 to pay your bills and receive tax certificates, which will allow you to deduct expenses and receive credits on your tax return. Don’t forget medical expenses paid for you, your spouse, and your minor children, as well as amounts you or your spouse paid for another dependent. Ask your pharmacy, dentist or healthcare provider for annual receipts. “Also think about childcare costs, investment costs (interest and brokerage fees), possibly moving costs as well as tuition fees and interest on a student loan,” adds Gino Gosselin.
5. Withdraw money from your TFSA
If you plan to withdraw money from your TFSA to cover certain personal expenses, do so before the end of the year. You will not lose your contribution room as a result of this payment and can repay this amount to the TFSA from January 1, 2024.
6. Open a CELIAPP
Thanks to the new Tax-Free Savings Account for the Purchase of a First Home (CELIAPP), it is possible to save a maximum of $40,000 for life towards the purchase of a first home. If you are 18 or older, you can donate $8,000 annually. Contributions made are deductible, and income earned in the account and qualified withdrawals are not taxable. But be careful: in order for unused rights from previous years to accumulate, the CELIAPP must already be open. Therefore, it is important to open one as soon as possible if you want to become an owner in the coming years.
7. Tax support when buying real estate
If you acquired residency in 2023, you may be eligible for tax help. “If you or your spouse purchase a first home as a primary residence, you may be eligible for a 15% non-refundable federal tax credit calculated on an amount of $10,000, for a maximum credit amount of $1,500. In Quebec, an equivalent loan is offered for a total of $3,000,” explains Gino Gosselin. If so, don’t forget to claim this credit on your 2023 tax return.