Ralph Moss Limited

Tax Strategies

Shine up your finances with a year-end review.

As the year-end approaches, look for tax planning opportunities that will disappear after Dec. 31. Year-end is also ideal to make sure your insurance is sufficient, and your investment strategies remain on track. The key? An up-to-date financial plan
.Tax savings could be among the benefitsif you take the time now to review yourfinancial situation
As the year-end approaches, income tax is probably one of the furthest things from your mind. After all, you don't have to submit your income tax return until the end of next April.
But by spending some time reviewing your situation now, you may be able to take advantage of potentially lucrative tax-saving opportunities - some of which must be acted on by Dec. 31 or they're gone forever.

Tax-deductible expenses
A reviewof the past year's events will jog your memory about what you can deduct next April. Here are some areas that are often missed

• Moving expenses. If you've relocated in order to start a new job, the expenses you incur are deductible as long as the move brings you at least 40 kilometres closer to your place of employment.
  Deductible costs include travelling expenses, movers' fees, and the realestate commission and legal fees involved in selling your old home.
  Students can deduct their movingcosts when they start a job, including asummer job

• Investment expenses. Interest expenses if you borrowed to invest, accounting and investment advice fees,safety deposit box fees, and other safekeeping charges are deductible.These charges must be paid before the year-end to be deductible from 1996 income. Other frequently overlooked deductions include convention expenses, repayment of taxable life insurance policy loans, and legal fees that relate to collecting employment income.

• Tax credits With a little strategic forethought, you can take maximum advantage of the tax savings presented by tax credits.

• Charitable donations. The charitable tax credit is worth about 27% (taking both federal and provincial taxes intoaccount) on the first $200 donated.Above that level, it jumps to 50%.
  By grouping your planned donations so that they fall into one year, you can pass the threshold and enjoy the higher rate. And thanks to the March 1996 federal budget, you can earn donation tax credits up to 50% of earned income. The limit last year was 20%

• The medical tax credit. Eligible medical expenses paid in any 12-month period ending in 1996 can generate a credit on your 1996 return. Advancing payment for 1997 services to qualify as part of 1996's claim may generate a larger credit.
  Another tip: Eligible expenses for all family members can be claimed by either spouse. Having the lower-income spouse claim the expenses may make it easier to pass the threshold above which the credit applies. That threshold is 3% of net income or $1,614 (whichever is less).

• Tuition fees. If you've attended a course at a qualifying post-secondary institution, your tuition fees qualify for a17% federal tax credit. If you've paid tuition fees for your kids to go to school, their tax credit may be transferable to you.

• Job-related strategies Whether you work for a large or small company, or work for yourself, tax-saving opportunities exist.
  • Bonuses. Contributing any bonus to your Registered Retirement Savings Plan(RRSP) up to your deduction limit is an ideal way to defer tax almost indefinitely.You have until next March to contribute for the 1996 tax year, but the sooner you invest, the more you'll benefit from compound growth.
  • Retiring allowances. In addition to your regular contribution, retiring allowances can be rolled over into your RRSP, subject to the following limits:$2,000 for each year of service prior to1996, plus $1,500 for each year prior to1989.
  • Installment payments. If you're self-employed, chances are you're required to submit personal income tax installments on a quarterly basis. Your fourth-quarter installment is due Dec. 16. Be sure to pay on time to avoid late-payment penalties and interest charges.
  • For retirees. If you turned 71 in1996, be sure to convert your RRSPs into a Registered Retirement Income Fund (RRIF) or annuity before yearend. If you don't, the entire amount will be added to your taxable income.
    If you do establish a RRIF this year, remember that you aren't required to start making withdrawals until the end of next year. By postponing withdrawals until after Jan. 1, you won't have to report the income until April 1998, when you file your return for the 1997 tax year.
• The big picture The end of the year is also an ideal time to sit back and review your total financial plan.
  • Insurance. Check your existing personal, home, and auto insurance policies. Are they still adequate given the changes that may have occurred over the course of the year?
    If you've married, divorced, or had a child, for instance, you probably have different life insurance needs than you did last year.
  • Investments. Review your existing strategy. Are your current investments meeting your objectives for income and growth? Do you expect your needs to change in the near future? If you're planning to retire in the near future, for example, it may be time to alter your investment mix.

A yearly review, combined withprofessional advice, can keep yourfinancial plan on track.