Finance tips for Santa

Santa’s on a tight deadline. He’s got less than a week to make sure all presents are packed and his reindeer are fit to take flight.

The end of year is also a crucial time for last minute financial planning.

Read: Santa makes the big bucks in 2012

“Santa is not only Canadian, he is also a prominent philanthropist, business owner, senior citizen, extensive traveler and last of all, a taxpayer,” says Richa Hingorani, regional financial planning consultant, RBC Financial Planning. “Because of that, he needs to take into account several taxation and financial planning considerations, as do many Canadians.”

Here are some tips.

• Charitable donations. Santa is one of the world’s most prominent philanthropists. Fortunately, most of his donations will be made by the December 31 deadline so that credit can be made on his 2012 tax return.

Read: Start the donation discussion

• Income Splitting. This is an important consideration as Mrs. Claus is not (as far as we know) employed. Santa might want to consider income splitting with to minimize his annual tax liability by using a prescribed rate loan to Mrs. Claus. Depending on the amount loaned (the current interest rate is one per cent), the amount of tax paid by Santa could be substantially reduced.

• Avoid the OAS Clawback. Santa’s OAS will start to be clawed back once his 2012 income reaches $63,511.

Read: Prepare clients for OAS and tax changes

• Santa does extensive travelling. Because of that, he needs out-of-country travel insurance for his Christmas Eve flight. He should also consider out-of-country medical insurance, just in case.

• If Santa has made investments, the last trading day to ensure losses can be used to offset gains from this year is December 24 for Canadian transactions and December 26 for U.S. transactions.

• Is Santa getting ready to RRIF? If Santa has yet to turn 71, he will need to start drawing down his RRSP in 2013. The minimum withdrawal amount will be 7.31%.

Read: Best ways to mature RRSPs

• Santa is an (incorporated) business owner with an eternity of active years ahead of him. As such, he should consider opening an Individual Pension Plan (IPP). An IPP is structured to provide tax relief for the corporation and enhanced retirement savings (more than an RRSP).

• Santa will need some hard-earned relaxation after the holiday season. As a Snowbird heading south for the winter, he must remember if he stays in the U.S. for more than 183 days in two consecutive years, he may be considered to be liable for U.S. income tax.