Thinking about taxes is no one’s idea of getting into the holiday spirit — but cleaning up your tax act before the end of the year could yield a bigger tax refund or give one last boost to your 2018 savings.
Here are four tips to make the most of tax credits, refunds and government grants.
WATCH: Should your savings go into an RRSP or a TFSA?
If you’re due for a root canal treatment, you may want to take care of that before Dec. 31. Non-cosmetic dental expenses that aren’t covered by your insurance are eligible for the medical expense tax credit.
Only expenses in excess of $2,302 or three per cent of your net income (whichever is less) can be claimed for your 2018 federal tax credit. The good news is, though, that families can pool those costs and claim them on one person’s return.
Eligible expenses include anything from dentures to air purifiers for people with chronic respiratory ailments or immune system disorders.
You can see a full list of eligible expenses here.
Another reason to spend in 2018 rather than 2019 is the home accessibility tax credit. Seniors and Canadians with disabilities can claim expenses for renovations that improve their home accessibility, such as wheelchair ramps and grab bars in the showers.
You can claim up to $10,000 a year for 15-per-cent tax credit.
If you foresee having to incur this kind of expense, spending the money by Dec. 31 means you will get the credit in a few months with your 2018 tax refund instead of having to wait until 2020.
In general, the end of the year is the best time to collect tax receipts and make sure you have everything you’ll need for tax season. But instead of collecting or sifting through tiny pieces of paper in a shoebox, you can often ask folks like your pharmacist or dentist to give you a printout of all your expenses for the year — your accountant will be grateful.
WATCH: 6 easily-overlooked tax credits or deductions
If you turned 71 this year, Dec. 31 is the last day to contribute to your registered retirement savings plan (RRSP).
But before you add money, take a look at your expected income level, said Scott Evans, financial advisor at BlueShore Financial. If it will stay roughly the same once your RRSP turns into a retirement income fund (RIF) with mandated minimum annual withdrawals, it might not make sense to add funds.
That’s because the tax that will be applied to that money when you take it out later on would be the same as what you’d pay today. And because your time horizon is shorter, there is a much smaller time window for those funds to earn returns tax-free inside the account, Evans noted. Speak to a financial adviser about whether a last RRSP contribution makes sense.
Dec. 31 is also the deadline to add money to a registered education savings plan (RESP).
For every dollar you contribute, the government puts in another 20 cents, up to $500 a year per child in free money. If you skip a year, you can catch up the year after and receive up to $1,000 in government grants for $5,000 in contributions. But if you let things slide for several years, you’ll have to make up for that gradually to avoid leaving money on the table.
RESP government grants are capped at $1,000 per year so if you had $10,000 in contribution room and put that money in all at once, you’d still get only $1,000. You’d have to contribute $5,000 in two separate years to receive the full $2,000 in grants.
WATCH: Why do university tuition fees keep going up?
The end of 2018 has been a tough one for financial markets. If you have investments in a non-registered account, though, you might be able to turn some of your lemons into lemonade.
Selling investments at a loss before Christmas allows you to declare a capital loss, which would help offset your portfolio gains for the year. This will reduce — or potentially eliminate — your tax due on those investments.
If your losses for the year more than offset your gains, you can use them to reduce your capital gains in any of the three preceding years or in any future year.
Keep in mind, though, that sell orders for money-losing investments must be processed by Dec. 31. The last day to submit a sell order for stocks and meet the deadline is Dec. 27, Evans noted.
WATCH: Tips to withdraw from your RRSP without penalty
If you beat the market this year, you might still be able to get a tax break — that’s if you donate some of your winning investments to charity.
“A lot of people think about donations only in terms of cash,” said Evans. But if you donate securities, you might be able to avoid taxes on capital gains (the rise in value of that particular investment). In other words, you’re donating pre-tax money.
In general, Canadians get 15 per cent back on the first $200 of charitable donations, and a 29-per-cent refund on anything beyond that amount.
If you’re donating for the first time, you can claim an extra federal tax credit of 25 per cent on your first $1,000 of donations.
© 2018 Global News, a division of Corus Entertainment Inc.