The end of 2020 is right around the corner and what a year it has been. We are not quite done yet!

We have compiled some valuable year-end tax planning information and we encourage you to read through this carefully. Please note that these are only a few ideas amongst a wide range of strategies. First, allow us to share a big win with you:

President’s Circle

Alexander Petrov had the honor of being named to the President’s Circle of RBC Dominion Securities. This award is given to less than a handful of advisors in the country who have excelled at the highest level in terms of business performance, quality and integrity of business processes and positive impact on the community. We want to express our gratitude to our clients for your trust in us and for being the reason we work relentlessly. We will continue to deliver the highest standard of care to clients & continue to be the team of choice to Canada’s most successful families.

Year-end Tax Planning and Reminders
We always recommend consulting with your accounting team & us when considering these strategies. Tax-planning is a broad, complex topic and it should be assessed on a case-by-case basis. As best practice, we recommend sharing your CPA’s coordinates with us so we can collaborate with them on your behalf.

• Tax Harvesting (Also known as Tax Loss Selling)
  Every December for all non-registered investment accounts, we sell all positions that are at an unrealized loss, swap them with alternative investments in the same respective asset classes, hold them for 30 days and then buy back the positions if they are still in our model. In other words, we crystalize all capital losses (while staying invested as per your investment policy) so that you can use those “losses” against capital gains. Note that you can then carry back those capital losses 3 years or carry them forward indefinitely. The 30 day strategy is in place in order to respect the CRA’s superficial loss rules.
  
  *BUSINESS OWNERS: Please speak with your tax professional or allow us to communicate with them to determine what your CDA (Capital Dividend Account) balance is as soon as possible. If your corporation has a significant CDA, creating “losses” will lower the balance. If your corporate year end is December 31st, please contact us by December 16th 2020.

• Consider a final RRSP contribution if you turned 71 or will turn 71 in 2020
  If you turned or will turn 71 in 2020, your RRSP account will automatically convert into a RRIF on December 31^st 2020. Once the conversion to RRIF takes place, you will no longer be able to make contributions and benefit from that tax-deduction. This year would be your final opportunity to make an RRSP contribution and benefit from the deduction.

• TFSA withdrawal planning
  You can make tax-free withdrawals at any time, for any reason, and any amount you withdraw is added back to your available contribution room on January 1^st of the following year. If you’re thinking of making a withdrawal from your TFSA in the near-term, consider doing so before December 31^st. This allows you to recontribute the amount withdrawn as early as January 1 2021, rather than having to wait until 2022 to recontribute.

• Accelerated mortgage payment
  In certain instances, accelerated mortgages allow for a limited lump sum payment every calendar year without penalty (often up to 10%). Depending on your goals and your cash flow situation, you could consider making that lump sum payment in December 2020 and again in January 2021 without penalty. However given that mortgage rates are at historical lows, keeping your capital invested can create an interesting leverage effect & possibly produce a more advantageous financial outcome.

• Year-End Bonus Planning

f you expect to be in a lower tax-bracket next year, consider deferring the receipt of your bonus (if your employer permits) to early 2021.

• Business Owners: Purchase assets for your business

If you intend on purchasing assets for your business (i.e., a computer, furniture, equipment, etc.), consider making this purchase before year-end. If the asset is available for use, this year-end purchase will allow your business to claim depreciation on the asset for tax purposes. For most assets, half of the regular allowable depreciation can be claimed for tax purposes in the first year of an asset purchase, regardless of when it was actually purchased during the year.

Early 2021 Planning Tips

• Consider contributing to your RRSPs ahead of the deadline
• Consider maximizing your TFSA as early as possible
• If you are a business owner, 40 years of age or older and paying yourself a salary of over $100K, consider an IPP. Contact us to do an IPP illustration for your situation.
• Communicate with us about your financial goals for 2021
• Communicate with us early about any cash requirements so we can adjust the investment strategy accordingly
• If you have not reviewed your will in the last 5 years, do so to ensure it reflects your wishes. Communicate with us to see if our Will & Estate consultant may be able to help.
• Review your insurance policies to see if they are still appropriate. Our Estate planning specialist may be able to help.

If you have any questions, please reach out to our team directly.

Our team operates with a Family Office model. This means our advice extends to all areas of wealth management and we utilize specialists in different areas such as financial planning, estate planning, tax planning while investment management remains at the core of our advice.

Most of our new clients come to us by way of referrals from satisfied clients or from trusted professionals. If you think we can help someone you know, please do not hesitate to reach out to us to discuss.

We wish you a Happy Holiday Season and a 2021 full of health, love and wealth.
- The Petrov Wealth Management Group