'Tis the season for tax planning
by Silvia Jacinto

With festive celebrations underway, now's not only the time to toast friends and family, but also the time to put the finishing touches on your 2007 tax planning. Much of the tax relief you'll seek next April requires action this year, so don't wait until after the New Year's celebrations to take action.

Registered Retirement Savings Plan (RRSP)

Although the Mar. 3, 2008 contribution deadline for RRSPs may seem far away, given the tax-free accumulation of investment returns, it's never too early to contribute.

There have been some changes to the RRSP age limit as a result of the March 2007 federal budget. You can now contribute to your RRSP at any time before Dec. 31 of the year you turn 71 (69 under previous rules), giving you an extra two years to take advantage of the RRSP tax benefits. If you're between the ages of 69 and 71, you may have already transferred your RRSP to an RRIF before the change in the age limit. To benefit from the later RRSP maturation age, you may transfer any of the property held in your RRIF back to an RRSP in a tax-deferred manner. Moreover, the government is waiving the minimum 2007 RRIF withdrawal requirement for those turning 70 or 71 this year, and the minimum 2008 withdrawal requirement for those turning 71 next year.

If you are 71 years of age or older, have RRSP deduction room and have a younger spouse, consider making a contribution to a spousal RRSP to take advantage of the deduction that wouldn't be available for your own plan.

Registered Education Savings Plan (RESP)

The government provides a grant of up to $500 (on $2,500 of your annual RESP contribution) per year when you make contributions to an RESP. If you have grant room in your RESP, consider contributing to the plan before the end of the year. The government has waived the annual RESP contribution limit and increased the lifetime contribution limit from $42,000 to $50,000, enabling RESP subscribers to make larger lump-sum contributions to receive the maximum government grants before the plan's maturity.

Charitable donations

Think about making charitable donations on or before Dec. 31, 2007 to benefit from the donation tax credit in your 2007 tax return. You should also consider donating shares of publicly listed companies instead of cash, as there are no capital gain consequences on the disposition of the shares to a charity.

Turn your foreign exchange losses into tax gains

With a weaker U.S. dollar, it's no surprise you may have unrealized foreign exchange losses in your investment portfolio from U.S. cash or other U.S.-dollar securities. You should think about triggering these capital losses before the end of the year to offset against capital gains realized earlier in the year. If your losses exceed your gains, you might consider carrying the excess back to recover capital gains tax paid in one or more of your three preceding tax years.

Other deductions and non-refundable credits

If you take public transit, you won't want to miss out on the non-refundable tax credit on the purchase of monthly, weekly and some single-trip fare passes. You must retain appropriate documentation to support your credit claim, such as pass receipts, credit card statements and the expired passes. Keep in mind that if you pay for a January 2008 pass before the end of the year, you can't use this payment toward your 2007 tax credit. Only passes used for 2007 travel are eligible for the credit. However, keep the receipt — it can be used toward your 2008 credit.

If you paid fees to enrol your children in an eligible fitness program, you may be able to claim a non-refundable tax credit of up to $500 per child. To be eligible for the credit, the program must meet certain criteria and you must have copies of all program receipts. Consider enrolling your children in programs before Dec. 31, 2007 rather than in the new year to take advantage of the 2007 credit.

Consider paying professional dues, investment-related carrying charges and childcare expenses before Dec. 31, 2007 in order to deduct these against your 2007 taxable income.

You're entitled to a tax credit for medical expenses paid in any 12-month period ending in 2007, if the expenses exceed either three per cent of your 2007 net income or $1,926 — whichever is less. If you expect to incur large medical bills in 2008, consider prepaying them before the end of this year to accelerate the tax relief.

With the new year slightly more than a sip of champagne away, now's a good time to revisit your 2007 tax-planning strategy and consider your plans for 2008.

Silvia is a Senior Manager, Canadian Tax. She can be reached at (416) 644-4424 or by e-mail at silvia_jacinto@mintzca.com.

Tax Alert is an e-newsletter written by the Tax Team of Mintz & Partners LLP. Please go to http://www.mintzca.com/index.php?section=taxdirectory to learn more about our Tax Team. The issues raised are for information purposes only. Readers are urged to contact their professional advisors before acting on the basis of the material contained herein.

This office is an independently owned and operated member of the Collins Barrow National Cooperative Incorporated. The Collins Barrow trademarks are used under license. For more information about Mintz & Partners, please visit our Web site at www.mintzca.com.

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