hey guys it's adrian here the canadian in a t-shirt and today i'll be breaking
down the best year-end tax saving tips for canadians these are the strategies that i use
every single year in december to minimize my tax bill maximize my tax efficiency and
financially prepare for the new year these are tips that everyday canadians can take advantage
of at the end of the year to save money on their investment and employment income taxes
for people with business income i'll be making a whole separate video on business tax saving
tips for this video i'm going to assume that you understand the basics of how canadian taxes work
what are tax brackets and marginal tax rates and the different tax sheltered accounts like the TFSA
RRSP and RESP i've already made videos on each of these topics so if you're rusty on any of this
click the pop-up at the top right to check out my canadian tax guide playlist
and then come back to this video i'll also include a link in the description box below
the first tip is to maximize your TFSA the TFSA is one of the best tax sheltered investment vehicles
in canada basically you can hold stocks bonds ETFs REITs pretty much any investment inside a TFSA and
all of your investment income will be completely tax free so any dividends DRIPs or capital gains
you earn inside the TFSA will not be taxed this is awesome but there is a limited amount of money you
can put into your tfsa and this contribution room is based on your age make sure you check out my
tfsa explained video to learn how this all works what kind of investments you should hold in your
tfsa and how much money you can put into your TFSA based on your age you should maximize your TFSA as
soon as possible that gives your investments even more time to grow tax-free so if you still have
unused TFSA room at the end of the year try your best to maximize it right away even if you
are maxed out remember on january 1st of the new year every canadian will gain an additional six
thousand dollars of tfsa contribution room and if you made any TFSA withdrawals this year
you also regain that amount that you withdrew so in december even if your TFSA is already maxed
out every canadian will gain new tfsa room in a matter of weeks so be prepared on january 1st
to contribute to your TFSA and max it out again my suggestion is to stockpile whatever cash you
can in december so as soon as january hits you can put that money into your TFSA and start investing
tax-free the sooner you make a tfsa contribution the more time you'll have for tax-free growth but
when i say stockpile cash do not take money out of your emergency savings fund i've said this
many times but it's so important you should never even think about putting money into investments
unless you have paid off your credit card debts and you have an emergency savings fund built
up but what if you don't have any cash in december what if all your money is tied up in investments
in a non-registered account also known as a margin account in that case you're paying unnecessary tax
on those investments why pay taxes on investment income when you have room in your tax sheltered
accounts just waiting for you so you might want to consider transferring those stocks from your
non-registered account into your tfsa i'll be making a whole video on how to do this transfer
and the implications you have to consider but basically you can transfer those stocks into
your tfsa but the cra will treat this as if you sold those stocks as cash and then move the cash
amount into your tfsa if the stocks have gone up in value since you bought them you will have to
pay capital gains tax when you make the transfer since it's treated like a sale so it's a bit of a
balancing act in the immediate future you'll have to pay capital gains tax on these stocks so your
tax bill for this year will go up but all future income you earn from these stocks will be tax-free
in your tfsa until the end of time also when you transfer stocks into your tfsa the contribution
amount is the current market value of the stocks not how much you originally bought them for so if
it's january first and you only have six thousand dollars of TFSA room you can only transfer in
six thousand dollars worth of stocks today at this moment it doesn't matter how much or how little
your initial investment was the main point is that you want to maximize your TFSA as soon as possible
and the easiest way is to save cash in december and move that money into your TFSA as soon as
january 1st hits this cash approach is simple and worry free and you don't have to worry about the
potential capital gains tax like you would if you're transferring stocks into your tfsa if
you have children you should treat your resp the exact same way as your tfsa at the end of the year
i made two whole videos on how the resp works and how to maximize your free government grant
money so click the pop-up to check those out the best strategy with the resp is to put in $2500
into each child's resp every single year to get that $500 of free government grant money every
year and just like the TFSA your RESP investments grow tax-free so it's best to put in that money
as soon as the new year hits so in december i suggest to save some cash and prepare to
contribute to your child's resp right on january 1st if you have kids i would prioritize your resp
contribution over the tfsa both the resp and the tfsa give you tax shelter growth but the resp
also gives you free government grant money so you don't want to miss out on that but only contribute
$2500 per year per child to max out those grants so that's what you should do if you have extra
cash at the end of the year save it up and get ready to put it into your tax sheltered accounts
in january but what if you don't have any cash and you need money? the good news is that if you need
to withdraw money out of your TFSA december is the best time to do it i urge you to treat your TFSA
as a long-term investment vehicle ideally you shouldn't be taking money out of your TFSA
until retirement to maximize the tax sheltered benefits but if you absolutely need to withdraw
cash december is the best time to make a TFSA withdrawal and january is the worst time
when you withdraw money from your TFSA you can't put that money back in for the rest of the year
but whatever amount you withdrew you regain the contribution room as soon as january first hits
simple example let's say your TFSA was maxed out and then you withdrew four thousand dollars to pay
for a new roof for the rest of the year your TFSA is still maxed out you can't put a single dollar
back into your tfsa but on january 1st of the new year you regain that four thousand dollar
withdrawal amount plus the regular six thousand dollars of contribution room that everyone gets
so on december 31st your TFSA is maxed out you have zero room but one day later on january 1st
you now have ten thousand dollars of available tfsa room so if you need money december is the
best time to withdraw from your TFSA since you'll only have to wait a few short weeks
to regain that contribution room if instead you wait until january to make this withdrawal you'll
have to wait a whole 12 months before you put that money back into your tfsa
another way to get some money if you need it is to sell stocks from your non-registered or margin
account and if you sell these stocks or etfs at a loss you can actually reduce your tax bill for the
year this is a strategic move called tax loss harvesting and it's usually done at the end of
the year there's a lot to talk about and i'll be making a whole video on this but the basic
idea is that you intentionally sell a stock at a loss in order to offset the capital gains tax that
you would be paying from your other investments this might seem a little counterintuitive you are
intentionally losing money by selling an underperforming stock maybe you don't believe
in the future of this company so it's better to cut your losses and cash out but in doing so you
will save money on taxes from other stocks which have been profitable this is very important this
only works in a non-registered or margin account do not try this in a tfsa rrsp or resp account
there is absolutely no benefit at all in selling a stock at a loss in a tax sheltered account
you will just lose money and even worse you will permanently lose that precious contribution room
so in a non-registered account you pay taxes on capital gains every time you sell a stock for
a higher price than you bought it for so if the current market price is larger than your adjusted
cost base basically how much you initially paid for the stock the difference is a capital gain
and you pay taxes on your capital gains for the year but what if our stock is at a loss
let's say we bought stocks for a thousand dollars that's our adjusted cost base but now come
december our stocks have fallen to a market value of only four hundred dollars if we decide to sell
it right now we will have four hundred dollars in cash but we will have lost six hundred dollars
from our initial investment so we have a $600 capital loss and you don't have to pay any taxes
on this because you only pay taxes on profits not on losses plus if we sold other stocks throughout
the year we could reduce our total capital gains by this $600 capital loss that reduces our tax bill
we could even reduce our capital gains tax to zero if our combined capital gains for the year was $600
we could choose to strategically sell our poor stock for a $600 loss to cancel out our capital
gains and so we won't owe any taxes for the year so if you've made a lot of capital gains in your
non-registered account throughout the year you can expect a significant tax bill so at the end of the
year you might consider selling an underperforming stock to reduce your tax bill but make sure you
don't wait until december 31st you want to give yourself at least three business days for this
trade to settle and for this loss to be posted but what if you don't have any capital gains to
offset this year you can actually carry this loss backwards and offset your capital gains from the
previous three years and so you'll get a check from the government in the form of a tax refund
or you can carry forward this capital loss indefinitely and offset any future capital gains
again i'll be breaking this down in detail in a future video but i do want to give this important
warning that a lot of people might not be aware of the cra has a superficial loss rule to prevent you
or your spouse from intentionally buying and selling a losing stock just to offset capital
gains you can't sell a stock within 30 days of buying it and once you sell a stock you can't
buy it back within 30 days if you break this rule this will be considered a superficial loss and
this capital loss will be denied you won't be able to use this loss to lower your tax bill you've
just intentionally lost money with no benefit at all so selling a stock at a loss only works in
a non-registered account and it has to be a stock you actually intend to invest in if you buy it and
sell it and buy it back within 30 days you're not investing you're trying to game the system and it
won't work remember at the beginning of the video i said that if you transfer a stock from your
non-registered account into your TFSA it's treated as if you sold the stock unfortunately that only ever
works against you it never works in your benefit so if your stock went up in value and you transfer
it's treated as if you sold it at a profit and now you owe capital gains tax unfortunately if
your stocks went down in value and you transfer you don't get to claim this capital loss to reduce
your tax bill the only way to claim a capital loss is to actually sell it for cash i'll break
down the scenarios in a later video but here's a good rule of thumb for transferring between your
non-registered account into a TFSA or RRSP if this stock is currently down but you intend to hold on
to it then do a transfer you don't get to reduce your tax bill but hopefully the stock will recover
and grow tax-free but if you don't intend to keep the stock then it's better to sell it as cash
and move that cash amount into your tfsa now you can buy a better stock in your TFSA
and you can claim a capital loss to reduce your capital gains tax for the year another strategy to
reduce your tax bill is to wait until the new year to sell your stocks again this only makes sense in
a non-registered account where if you sell a stock for a profit you'll have to pay capital gains tax
when you file your taxes so if it's december and you sell a stock for a profit you have to pay
taxes on those capital gains in a few short months in april when your taxes are due instead if you
wait a few short weeks and sell the same stock in january those gains will be taxed for next year so
you only have to pay those taxes the following april that's a whole year and four months away
so if you just wait a few weeks to sell your stock you'll earn yourself a whole extra year to enjoy
that money before you have to pay taxes on it this is especially useful if you know that your
income will be smaller next year let's say that next year you intend to take some time off work
maybe go on maternity leave or even retire you'll be in a smaller tax bracket next year so you'll
pay even less in capital gains tax than you would if you sold your stocks this year in december one
of the best strategies to reduce your tax bill all year round but especially at the end of the year
is to contribute to your rrsp the rrsp is a tax sheltered investing account designed to fund your
retirement so the earlier you contribute to your rrsp the more time you have for your investments
to grow tax-free but a huge benefit is that whatever money you contribute into an rrsp
you can reduce your taxable income by that amount that will immediately decrease your tax
bill and you might even get a tax refund from the government the rrsp is definitely more complicated
than the tfsa and i've already made two videos on the rrsp breaking down the rules for contributions
and withdrawals how the rrsp tax deduction works and how to invest in your rrsp to maximize the
tax sheltered benefits so click the pop-up at the top right to check out my rrsp explained videos
if you have RRSP contribution room available i would definitely recommend to put money into
your rrsp as soon as possible to gain those tax shelter benefits and even if you're in a low tax
bracket remember you don't have to claim those rrsp deductions right away you can put the money in and
let it grow tax-free but carry forward those rrsp deductions to a future year when you have a higher
income you're in a higher tax bracket and thus those rrsp deductions will save you even more in
taxes than they would if you claim them right away but if your income is higher than normal this year
let's say you received a large end of year bonus you'll want to reduce your taxable income as much
as possible this year and one of the best ways to do this is to contribute to rrsp
and even claim unused rrsp contributions from previous years to reduce this year's taxable
income even if you don't have enough cash on hand in december to add to your rrsp any contribution
you make in the first 60 days of next year can be applied against this year's income so if you
want to reduce this year's tax bill contribute as much as you can to your rrsp before march 1st
you basically get an extra 2 months or 60 days to make rrsp contributions for the year finally this
isn't a tax tip but it is a money saving tip that canadians should definitely take advantage of at
the end of the year make sure you maximize your employer benefits before december 31st that means
remember to use your vacation days don't let them go to waste especially if you can't carry them
forward to next year and please use your employer health benefits to its fullest you're already
paying for this health plan so use it go to the dentist get new glasses get a massage go visit a
chiropractor i know we all get caught up in work throughout the year but please make an effort to
use these benefits before the end of the year it's good for your well-being for your physical health
and for your mental health and as someone who is now self-employed i'm telling you you will
miss these benefits when they're gone so don't let them go to waste so there you have it those
are my favorite money-saving tips that i use every december to reduce my tax bill for the year and to
put me in a good financial position for next year try your best to maximize your tfsa and resp and
be prepared for a new contribution room on january 1st if you have to make a tip of state withdrawal
make sure you do it in december not in january to regain the contribution room right away if you
have a lot of capital gains in a non-registered account you might want to consider selling an
underperforming stock at a loss to reduce your tax bill but be mindful of the superficial loss
rule and don't try to game the system if your stocks have gone up in value consider waiting
until january to sell them to give yourself a whole extra year before taxes are due make sure
to contribute to your rrsp to reduce your taxable income for this year or for future years if you
expect your income to increase and finally take full advantage of your employer's health benefits
thanks for watching guys and be sure to like comment and subscribe if you found this video
helpful every thumbs up and comment really does help me build this channel on youtube and hit that
bell icon to be notified of my new videos every week and if you like to follow me on instagram
or facebook @CanadianTShirt click the link in the box below or click the links on my homepage
so happy holidays and i'll see you guys on the next episode of the canadian in a t-shirt bye guys