’Tis the season…for tips. Year-end is a great time for advisors, investment counsellors, pundits, and other financial experts. They can fire off opinions and advice, filling websites, YouTube videos, and newspapers with reams of predictions, analysis, advice, and commentary…that most people won’t pay the least bit of attention to. And who that do will soon forget what they heard, in the hustle and bustle of the holiday season. But there is, in fact, a handful of year-end investment and tax tips that make a lot of sense. Mainly because they could save you a bundle of dough – and maybe even get you a tax refund.
Avoid buying mutual funds in December
For example, you should not buy a mutual fund in December in a non-registered account. If you do, you could end up paying tax without ever having made a buck in gains. It all has to do with year-end distributions made by mutual funds, which impact net asset value. Why pay for someone else’s distribution? Wait, and invest in January.
Then, if you’re an investor, and you’ve got some losing stocks in your portfolio, you might want to consider selling before year-end. That’s because you can use losses to offset any gains you might have made earlier in the year on other investments. To qualify for 2012, the settlement must take place in 2012.You still have time – barely. The last possible day to sell securities to be eligible for a capital loss in 2012 is Monday Dec. 24, to settle on Dec. 31, 2012. For U.S. exchange-traded stocks, the last day to trade is Dec. 26, for settlement on Dec. 31.
There are also a number of payments that you can make before year-end to get a tax benefit for 2012. These include such things as charitable donations (you can still do it online to ensure your donation is processed for 2012), interest payments on money borrowed for investment purposes, investment counseling fees, even safe-deposit box rental fees.
While not strictly investment-related, ensure you make any necessary medical or dental payments for items not covered by provincial health plans. These include such things as glasses, prescription drugs, and hearing aids. Pay before year-end and you can add them to your medical expense deduction for the year.
Defer RRSP/RRIF withdrawals
And if you’re planning a withdrawal from your RRSP or RRIF, wait until January if you can. That way, you’ll defer the tax hit for another year.
I’d like to take this opportunity to wish everyone a very happy holiday season and a healthy and prosperous New Year.
Catch Robyn on CityNews Channel next Friday, Dec. 28, between 8:15 pm and 8:30 pm, when she’ll talk about financial New Year’s resolutions you might actually be able to keep!