Smart moves before the end of the tax year

Before you know it you’ll be watching the ball drop and singing Auld Lang Syne as you welcome 2022 in with higher hopes than ever before.

Here are just a few smart moves you can make before this year is over that will benefit your taxes.

COVID tax deduction still to apply

Remember when you got that juicy work-from-home tax deduction last year? Well, the government has promised to extend this benefit into 2022. In 2020, remote work-from-homers could deduct up to $400 in home expenses from their taxable income, without receipts or a T2200 form from their employer. The promise is to actually increase this deduction to $500, and it’s supposed to remain a no-fuss process. There’s not much to prepare for here other than to ensure you don’t forget to include this deduction when you file your return.

Set aside a tax allocation if you’re self-employed

Your tax accountant can counsel you specifically on what percentage of your income you should be setting aside for your looming tax bill, but generally you’ll want to have 20 to 30 per cent of your revenues set aside to pay your income taxes. The amount owing is a percentage of your net income, which is why you should also ensure that you’ve got all your eligible business receipts and expenses organized that can go toward offsetting your gross income. Use the CRA website to cross-reference your expenses with what’s allowed to be written off.

Make your charitable contributions pronto

Not only do these organizations really need the cash now, but contributions count toward additional tax savings if done before the end of 2021. So, hop online and figure out who you want to support . Most organizations have a digital portal that will issue your tax receipt immediately. You can also donate securities in many instances and you’ll want to work with the charity sooner rather than later to get that done. Make sure the charity is registered or you won’t get a tax receipt.

If you’re retired and still working, stop contributing to CPP

If you’re over 65 and still working, it could make sense to stop your CPP contributions and use that money for other purposes. Know that you’ll need to fill out a form called a CPT30. Talk to your accountant first, but if it looks like the right approach for you, do this to put more money in your pocket faster.

If you’ve got a rental property (even a cottage), gather all your receipts

Maintenance, repairs, advertising, landscaping and more. Get all the receipts organized for your income properties. If you’re unsure if something is eligible for a tax deduction, check with your accountant.

RRSP, TFSA and RESP contributions

Unused room in your RRSP and TFSA is carried forward. If you want to have your RRSP contributions count toward the 2021 tax year, you’ll need to make them before March 1, 2022. While that’s a number of months away, you might benefit from planning early to make your contributions, especially if it’s a larger lump sum and not just a regular monthly amount.

For the RRSP, TFSA and RESP (for your kids), the earlier you put this money to work, the more time you give your money to grow through the power of compound interest and reinvested returns. Also, within the RESP you’ll be eligible for the Canada Education Savings Grant (free money!), so get those contributions in to benefit from the grant as soon as possible.

If you wish to realize losses in your nonregistered investment portfolio you’ll need to do that before the end of the year and have the transaction settle before the year officially ends. Give yourself a few business days for the transaction to clear.

Medical expenses before the end of the year

If you have used all your benefits, you might have out-of-pocket expenses for medical costs. You could be eligible for the medical expense tax credit, depending on the amount you spend. (Such expenses must exceed three per cent of your income or $2,421 in 2021, whichever is lower). Gather your eligible receipts from the year.

The best strategy to plan for a smooth tax season is to get organized. Reach out now to your tax professional or your DIY software provider, especially if the matter is time sensitive. You can determine whether it’s better for your taxes to spend money on something now or in 2022.

This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star.