Show Transcript
With 2023 just around the corner, now may be a good time for families to assess their household finances. Greg Bonnell speaks with Nicole Ewing, Director of Tax and Estate Planning at TD Wealth, about some areas to focus on and some potential pitfalls to avoid.
Originally published on December 21, 2022
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With 2023 almost upon us, the holidays can be a good time for families to assess their household finances, position themselves for the year ahead. Joining us now for more, Nicole Ewing, Director of Tax and Estate Planning at TD Wealth.
Nicole, welcome back to the program. A timely discussion so let's just jump into it. At this time of year, where should our heads be when it comes to our personal finances?
Well, as always, [INAUDIBLE],, we want to be thinking about our overall plan and reflecting on whether or not we have executed on that plan this year and what we can do to put ourselves in a better position for next year.
So a couple of things that really stand out right now, we are coming up to the last two days of December. And December 31 is the deadline for a number of our strategies that we might want to put in place or some of the plans. So RESPs, for example, these are our registered education savings plans, they have time limits on this.
And so we want to, for those who might not be aware, you have the opportunity to contribute up to $50,000 for the education of your child, or grandchild, or other family member. And there are government grants that come along with that. So we make our contributions each year and the government will match or give us a grant up to 20% of $2,500.
So if you have not yet contributed your $2,500 minimum this year, I recommend going ahead and doing that. If the beneficiary that we're talking about turned 15 this year, that's a really critical date. So if they've not, if they haven't created a plan before now, 15 is the year that you need to make contribution in order to get those grants at play. If they turn 17 this year, then December 31 is going to be the last opportunity, again, to get that grant in place. So just thinking about what you might want to do there.
And then on the withdrawal side, you'll want to reflect on what your beneficiary's income is for the year. So if they are in school and you're accessing some of these funds, you want to see if there's an opportunity to pull out as much income as you can from the education assistance amounts and ensure that those are taxed in the lower rate of the beneficiary. So December 31 sort of a key date for RESPs.
Other things-- we know, deadlines for TFSAs, the end of the year, December 31, you can get your money in and that will trigger again in January 1 with an additional amount.
Tax loss selling, December 31 is the deadline for that. So a number of things we want to be thinking about.
When it comes to the tax free savings account, I want to dig a little deeper. Because perhaps people who haven't availed themselves of that vehicle are sometimes confused by the name savings account-- it's much more than that-- and sometimes don't realize what contribution room that they might have, particularly if they have never used the vehicle.
Yes. No, it's an incredible opportunity, really, frankly, one of the best we have in Canada to grow our savings and grow our investments. And it is tax-free savings account, but it's intended to be used for both short-term and long-term goals. And we have the opportunity to invest in securities, ETFs, all those sorts of money-making vehicles. And you have then the opportunity to have that income growing tax-free in the account. And when you pull that money out it is also tax-free.
So quite significant. This year was $6,000 is the annual limit, which brings us to if you have been qualified since the beginning, when this account was first introduced, you would now have contribution room of $81,500, going up again next year, $6,500 of additional room, which will bring us to $88,000.
So I know in the early days when these accounts were first out, they didn't necessarily get the attention of people because it seemed like a modest amount. But certainly when we're over $80,000 of room and you think of that invested and growing tax-free, that's a great opportunity to really grow your investments in a very effective way.
This is also the time of year, of course, when you think about charitable giving. If you've been doing well, then pass it along. Do we have some deadlines for tax purposes on that front?
We do. So December 31 is the deadline for charitable donations as well. Now be mindful that when we come up to the end of the year, if you are thinking about contributing securities, which, again, it's a very effective, tax effective way of making a charitable donation, you'll want to be reaching out to those charities very, very quickly. Because they do have timeframes in place where they're able to accommodate the transfer in of those securities in kind. And we're really pushing up against it. May have missed that mark, but certainly worthwhile to reach out, contact those charities directly, and see if that's still an option.
And otherwise, we can make our charitable donations right up till December 31. But I wouldn't recommend leaving it that late. Do it today.
You mentioned tax loss selling as well. Obviously, this has been a year where people may have some losses in their portfolio, based on the performance of the broader markets. What do we need to be mindful of there as we tick down to 2023?
Well, again, December 31 is going to be our limit to crystallize our losses for this tax year. So we want to, again, be mindful of the, yes, December 31 is the deadline for tax purposes, but we need to give our institutions the time to settle those trades and to make sure that they've gone through. So December 28, very, very, very last minute to get your losses, or to get your securities sold and get those moving so that they can settle by the end of the year.
But really, at this point, you should know what your strategy is, you should know what your gains are, how many losses that you want to crystallize. Keeping in mind, again, that if you engage in that type of selling, we want to be mindful of the superficial loss rules, not repurchasing that same security within 30 days. But we can look at that again in January and either buy that same security or you can now, if you sell a security, you can buy a similar security within that 30 days and still be safe.
But again, December 28 very, very last possible minute for this. And I would encourage our viewers to really think about that today, again. Today is the deadline for everything, according to Nicole.
No better time like the present. These are the hard deadlines. They're very important to keep mind of as we head into a new year. What about maybe taking some time over the holidays, although it can be a busy period, to sort of think about what kind of position you want to be in next year financially?
This is where we really need to reflect. And this has been a challenging year for a lot of people, a lot of unexpected extra expenses, perhaps higher payments on our debts. And we want to put ourselves in as best a position as possible going into the new year. That means sticking to our budget.
That means not overspending during the holidays and not getting carried away with it and having a plan, if we are going to put some of those funds, if we are going to go in debt and have some of that on our credit cards, for example, to have a plan in place [INAUDIBLE] back as quickly as possible.
It's very easy to get lured by the joy of the season and particularly those of us who are last minute shoppers to go a little bit overboard, out of the guilt or overcompensation. But that's a poor strategy. Just remember that your loved ones, their affection for you is not dependent on the gifts that you're getting them. So make sure that you're not overstretching yourself and that you're positioning yourself as best you can.
Get together all of your records for the year. Collect as much as you can and that will put you in a much better position to do your filings in the new year for tax purposes and to reflect on whether or not any changes need to be made to your financial plan. Do we need to do some rebalancing? Do we need to think about, has this year changed the way that you think about risk and your risk tolerance? For a lot of people, that may have changed.
And so looking, again, taking now as an opportunity to say, OK, heading into the new year, what do I need to do to put myself in a position that I want to be at the end of next year?
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[AUDIO LOGO]
With 2023 almost upon us, the holidays can be a good time for families to assess their household finances, position themselves for the year ahead. Joining us now for more, Nicole Ewing, Director of Tax and Estate Planning at TD Wealth.
Nicole, welcome back to the program. A timely discussion so let's just jump into it. At this time of year, where should our heads be when it comes to our personal finances?
Well, as always, [INAUDIBLE],, we want to be thinking about our overall plan and reflecting on whether or not we have executed on that plan this year and what we can do to put ourselves in a better position for next year.
So a couple of things that really stand out right now, we are coming up to the last two days of December. And December 31 is the deadline for a number of our strategies that we might want to put in place or some of the plans. So RESPs, for example, these are our registered education savings plans, they have time limits on this.
And so we want to, for those who might not be aware, you have the opportunity to contribute up to $50,000 for the education of your child, or grandchild, or other family member. And there are government grants that come along with that. So we make our contributions each year and the government will match or give us a grant up to 20% of $2,500.
So if you have not yet contributed your $2,500 minimum this year, I recommend going ahead and doing that. If the beneficiary that we're talking about turned 15 this year, that's a really critical date. So if they've not, if they haven't created a plan before now, 15 is the year that you need to make contribution in order to get those grants at play. If they turn 17 this year, then December 31 is going to be the last opportunity, again, to get that grant in place. So just thinking about what you might want to do there.
And then on the withdrawal side, you'll want to reflect on what your beneficiary's income is for the year. So if they are in school and you're accessing some of these funds, you want to see if there's an opportunity to pull out as much income as you can from the education assistance amounts and ensure that those are taxed in the lower rate of the beneficiary. So December 31 sort of a key date for RESPs.
Other things-- we know, deadlines for TFSAs, the end of the year, December 31, you can get your money in and that will trigger again in January 1 with an additional amount.
Tax loss selling, December 31 is the deadline for that. So a number of things we want to be thinking about.
When it comes to the tax free savings account, I want to dig a little deeper. Because perhaps people who haven't availed themselves of that vehicle are sometimes confused by the name savings account-- it's much more than that-- and sometimes don't realize what contribution room that they might have, particularly if they have never used the vehicle.
Yes. No, it's an incredible opportunity, really, frankly, one of the best we have in Canada to grow our savings and grow our investments. And it is tax-free savings account, but it's intended to be used for both short-term and long-term goals. And we have the opportunity to invest in securities, ETFs, all those sorts of money-making vehicles. And you have then the opportunity to have that income growing tax-free in the account. And when you pull that money out it is also tax-free.
So quite significant. This year was $6,000 is the annual limit, which brings us to if you have been qualified since the beginning, when this account was first introduced, you would now have contribution room of $81,500, going up again next year, $6,500 of additional room, which will bring us to $88,000.
So I know in the early days when these accounts were first out, they didn't necessarily get the attention of people because it seemed like a modest amount. But certainly when we're over $80,000 of room and you think of that invested and growing tax-free, that's a great opportunity to really grow your investments in a very effective way.
This is also the time of year, of course, when you think about charitable giving. If you've been doing well, then pass it along. Do we have some deadlines for tax purposes on that front?
We do. So December 31 is the deadline for charitable donations as well. Now be mindful that when we come up to the end of the year, if you are thinking about contributing securities, which, again, it's a very effective, tax effective way of making a charitable donation, you'll want to be reaching out to those charities very, very quickly. Because they do have timeframes in place where they're able to accommodate the transfer in of those securities in kind. And we're really pushing up against it. May have missed that mark, but certainly worthwhile to reach out, contact those charities directly, and see if that's still an option.
And otherwise, we can make our charitable donations right up till December 31. But I wouldn't recommend leaving it that late. Do it today.
You mentioned tax loss selling as well. Obviously, this has been a year where people may have some losses in their portfolio, based on the performance of the broader markets. What do we need to be mindful of there as we tick down to 2023?
Well, again, December 31 is going to be our limit to crystallize our losses for this tax year. So we want to, again, be mindful of the, yes, December 31 is the deadline for tax purposes, but we need to give our institutions the time to settle those trades and to make sure that they've gone through. So December 28, very, very, very last minute to get your losses, or to get your securities sold and get those moving so that they can settle by the end of the year.
But really, at this point, you should know what your strategy is, you should know what your gains are, how many losses that you want to crystallize. Keeping in mind, again, that if you engage in that type of selling, we want to be mindful of the superficial loss rules, not repurchasing that same security within 30 days. But we can look at that again in January and either buy that same security or you can now, if you sell a security, you can buy a similar security within that 30 days and still be safe.
But again, December 28 very, very last possible minute for this. And I would encourage our viewers to really think about that today, again. Today is the deadline for everything, according to Nicole.
No better time like the present. These are the hard deadlines. They're very important to keep mind of as we head into a new year. What about maybe taking some time over the holidays, although it can be a busy period, to sort of think about what kind of position you want to be in next year financially?
This is where we really need to reflect. And this has been a challenging year for a lot of people, a lot of unexpected extra expenses, perhaps higher payments on our debts. And we want to put ourselves in as best a position as possible going into the new year. That means sticking to our budget.
That means not overspending during the holidays and not getting carried away with it and having a plan, if we are going to put some of those funds, if we are going to go in debt and have some of that on our credit cards, for example, to have a plan in place [INAUDIBLE] back as quickly as possible.
It's very easy to get lured by the joy of the season and particularly those of us who are last minute shoppers to go a little bit overboard, out of the guilt or overcompensation. But that's a poor strategy. Just remember that your loved ones, their affection for you is not dependent on the gifts that you're getting them. So make sure that you're not overstretching yourself and that you're positioning yourself as best you can.
Get together all of your records for the year. Collect as much as you can and that will put you in a much better position to do your filings in the new year for tax purposes and to reflect on whether or not any changes need to be made to your financial plan. Do we need to do some rebalancing? Do we need to think about, has this year changed the way that you think about risk and your risk tolerance? For a lot of people, that may have changed.
And so looking, again, taking now as an opportunity to say, OK, heading into the new year, what do I need to do to put myself in a position that I want to be at the end of next year?
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[MUSIC PLAYING]
