2016 Financial Resolutions

Top 10 tax resolutions that could help you make the most of your money in 2016

A new year, a new set of resolutions. Aside from the common resolutions of eating less sugar and drinking more water, we want to stress the importance of including your finances in your list of new years aspirations.

The Financial Post has put together a list of 10 tax resolutions that can help you make the most of your money in 2016. Check out the list below, and see if there are any that could apply to your own financial plan this year.

1. Contribute $5,500 to your TFSA for 2016.  Bringing your total contribution limit to $46,500.

2.  If you expect to be in a lower tax bracket when you retire than you are this year consider making an RRSP (Registered Retirement Savings Plan) contribution. While much of the focus over the next 60 days will be on the 2015 contribution deadline of Feb 29th 2016, why not get a head start on your 2016 contribution. The RRSP limit for 2016 is the lesser of 18% of 2015 earned income or $25,370.

3. If you've got kids under 18, be sure to contribute at least $2,500 to each child's Registered Education Savings Plan (RESP) to be able to take advantage of the  $500 Canada Education Savings Grant. You may also be able to catch up on missed CESGs from prior years.

4. Consider opening up a RDSP (Registered Disability Savings Plan) for a family member with a disability. You can contribute up to $200,000 over the disabled beneficiary's lifetime, which may be augmented by up to $90,000 in Canada Disability Savings Grants and Bonds.

5. Take advantage of the new "Home Accessibility Tax Credit". If If you're a senior or a person with a disability (or family member who lives with them), you may be able to claim the new HATC credit, worth up to $1,500 which was announced in the 2015 federal budget, and starts this year. It's a nonrefundable credit that provides federal tax relief of 15% on up to $10,000 of eligible expenditures per calendar year, per qualifying individual.

6. While income splitting for families, known formally as the Family Tax Cut, was eliminated for 2016, you may still be able to do some income splitting by taking advantage of the historically low prescribed rate. If you have a spouse, partner or kids in a lower tax bracket than yourself, consider a prescribed rate loan strategy whereby the higher-income earning spouse or partner loans funds to their spouse  at the record low prescribed rate, which is at 1% until at least March 31st.

7. When planning your charitable givings for 2016, consider donating appreciated securities directly to your charity of choice and eliminating tax on any accrued capital gains.

8.  Look into investing in a permanent life insurance policy. The tax rules are changing at the end of 2016, so now is the ideal time to purchase such a policy in order to maximize the tax sheltering available within these products.

9. Make sure your will is up to date. If you haven't updated your will in some time, why not resolve to have it reviewed in 2016 to ensure that it still jives with your testamentary wishes.

10. Plan now to avoid a tax refund next spring. If you regularly get a large tax refund each spring, consider applying for a reduction of tax at source using CRA Form T1213. Unfortunately, this needs to be repeated annually. 

For more information, and other tax related news, go to the FinancialPost.com

If you have questions regarding any of the above, or if you want to review your financial plan for 2016, contact us today.