Personal Finance

Year end finance strategies

As the year winds down, we have gone through market volatility, a federal election and ongoing changes to our tax rules. Based on all of these changes, I offer you some last-minute year-end finance strategies that may make a significant difference before the end of the year.

Defer income to 2016.

In 2016, the new Liberal government will be lowering the tax rate on the middle-income bracket from 22% to 20.5%. for those individuals that make more than $45,283 per year but less than $90,563 per year, deferring income to next year might save a little in tax. For example, if you are thinking of pulling money out of an RRSP, you might want to wait till January. If you are cashing out some stocks or mutual funds that have capital gains, you might want to wait till the new year to cash them out. Or maybe you can negotiate to get a bonus paid out in the new year instead of this year.

Related article: New tax rates for 2016

Trigger tax this year.

For those people making more than $200,000 per year, the Liberal government is planning to increase tax rates from 29% to 33%. As a result, for higher-income earners, taking money out in 2015 might save you from paying extra tax in the future. In Alberta, those that make more than $125,000 will get hit with even higher tax rates in the new year.

Tax-loss selling.

The stock market results will be mixed for 2015. Some markets have done well while others have not fared so well. If you are worried about a large tax bill as a result of selling profitable investments, you may want to look at selling investments that have not performed as well to offset the gains. Make sure you really want to sell these investments. If you are thinking about buying back these same investments, you must be careful of the superficial loss rules. The superficial loss rules require that you bought the investment at least 30 days prior to the sale or that you do not reacquire the investment within 30 days of the sale. Tax losses can be carried back 3 years to offset past gains. You must apply losses against gains in the current year first but any excess can be carried back.

Related article: What is tax-loss selling?

Invest in a spousal RRSP.

If you are investing in a spousal RRSP and you may need to make withdrawals in the near future (for retirement for example), you might consider making the RRSP contribution in December as opposed to January or February to help get around the 3-year attribution rules. Investing in a spousal RRSP in December 2015 means you might be able to take money out of the spousal RRSP in January 2018. Deferring the contribution by only 1 month to 2016 means that you must wait an extra year (January 2019) before you can withdraw the money to avoid attribution of income. One word of caution is that a contribution to a spousal plan in future years will extend the attribution dates. Attribution is based on the latest contribution to any spousal plan.

Related article: How to use a spousal RRSP properly

Contribute to an RESP.

You are allowed to contribute up to $2500 to an RESP each year for a child and be eligible for the Canada Education Savings Grant (CESG). If you have not maximized your RESP contribution in the past, you can make up an additional year’s contribution. For example, you could contribute $5000 into the RESP and be eligible for a CESG of $1000. The timing could not be better. An RESP may make the perfect Christmas gift this holiday season.

Related article: RESP carryforward rules

Watch when you make your payments and contributions.

Depending on your income level, some will face tax reductions next year while others will face tax increases. If your tax rates will decrease next year, this may be the perfect year to maximize deductions and credits like RRSPs, donations, medical expenses, etc. A deduction benefit depends on your current marginal tax rate. With lower tax rates, you will have a smaller tax bill but the deductions become less valuable. For those with a higher tax rate next year, it might be beneficial to save those deductions for next year. While RRSPs can be postponed until March 1, 2001, other payments like donations and medical expenses must be made prior to January 1 to qualify for the 2015 tax year.

While this is not an exhaustive list, it does represent some useful year-end finance strategies.


  1. Joe Meijndert

    I think the last day for RRSP is Feb 29, 2016.

  2. Vanna Lindholm

    Thanks for advice when to invest, I was just thinking about spousal RRSP, and told my insurance manager that I am going to start from January. First thing in Wednesday I am going to change this and to start at-once.
    Thanks for sharing

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