Time your move to another province. Unless you earn only self-employed business income, provincial tax is based on your province of residence on December 31. If you’re transferring to a province with a lower tax rate (Nunavut, for example), consider arriving before the end-of-year deadline. Conversely, if you’re moving to a province with a higher tax rate, like Quebec, you could postpone your relocation until after year-end.
Make a timely refund request. CRA’s fairness rules allow individuals and testamentary trusts to request a refund for prior taxation years. However, such adjustments are limited to the 10 prior years. If you’re requesting a refund for the 2006 taxation year, make the request before January 1, 2017.
Check your instalment requirements. Instalments are required if the difference between your combined federal and provincial tax, and the amount of tax actually withheld at source, was greater than $3,000 in either 2014 or 2015 and will be greater than $3,000 in 2016. This last test requires an advance estimate of your 2016 tax.
If you’re required to make quarterly tax instalments, you should review your expected 2016 tax liability before remitting your final instalment (due December 15, 2016). This is especially important where your mix of salary/dividends has changed from year to year, or where you had unusual income inclusions last year or expect increased deductions this year. The CRA charges interest on late or deficient instalment payments.
If you discover during the year that you should’ve made higher instalments, it’s possible to catch up, because the CRA will calculate credit interest on overpayments and apply that against interest deficiencies.
See Grant Thornton’s full year-end tax-planning guide here.
You’ll also want to consider two more reminders from Jamie Golombek, managing director of tax and estate planning at CIBC.
Maximize medical expenses. While medical expenses must be paid by Dec. 31 to a claim a tax credit for 2016, the related good or service doesn’t always need to be acquired in the same year. This provides an opportunity to prepay certain items for 2017 and claim them for 2016 if it enables you to exceed the minimum threshold required to qualify for a tax benefit. “An example I often give is if a child needs braces or orthodontist work,” says Golombek. “You might be able to get a medical expense credit right away for the amount paid this year, even if this is something that may be ongoing for the next number of months into the new year.” A tax credit can be claimed when total medical expenses exceed the lower of 3% of your net income or $2,237 in 2016.
Don’t delay charitable donations. If you’re thinking of making a charitable gift in the near future, do it before the end of the year so that you’ll get a donation credit right away to reduce your 2016 taxes. Both the federal and provincial governments offer donation tax credits that, in combination, can result in tax savings of up to 50% of the value of your gift in 2016, says Golombek.