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2022 Year-End Tax Planning Guide for Individuals

December 8, 2022

Tax planning should be a year-round affair. But as year-end approaches, now is a particularly good time to review your personal finances and take advantage of any tax planning opportunities that may be available to you before the December 31st deadline.

As we enter the final weeks of 2022, here are some tax tips individuals should consider.

Make charitable donations

Both the federal and provincial governments offer donations tax credits that, in combination, can result in tax savings of up to 54% of the value of your gift in 2022, depending on your province or territory of residence.

With total cash donations up to $200 in a year, the federal donation credit is 15% of the donation amount. For total donations exceeding $200 in a year, the federal donation credit jumps to 29% (33% to the extent taxable income exceeds $221,708) of the donation amount. Provincial donation credits are also available, and the total credit may be up to 54% once total annual donations exceed the $200 in a calendar year.

December 31st is the last day to make a donation and get a tax receipt for 2022. Keep in mind that many charities offer online, internet donations where an electronic tax receipt is generated and emailed to you instantly.

Gifts “in-kind”

Gifting publicly traded securities, including mutual funds and segregated funds, with accrued capital gains “in-kind” to a registered charity or a foundation not only entitles you to a tax receipt for the fair market value of the security being donated but also eliminates capital gains tax too. You should plan gifts-in-kind well before year’s end, to allow for sufficient time to make arrangements.

Individuals with changes to tax rates

If you anticipate that your income tax rates will be substantially different in 2023, it may be worthwhile to shift income and expenses between 2022 and 2023, where feasible.

Perhaps you may have just started, or returned to, work in 2022 so your income (and taxes) may be lower in 2022 than in the future. If so, you may wish to realize income in 2022 by taking steps such as selling investments with a capital gain, exercising stock options, or taking bonuses in 2022 rather than 2023, where feasible. It may also make sense to defer deductible expenses until 2023 where possible.

On the other hand, you may anticipate that your tax rate could decrease in 2023, perhaps if you plan to retire or if you had a one-time sale of an appreciated investment. If you expect your tax rate to be lower in 2023, you may wish to defer income by taking steps such as waiting to sell investments with a capital gain, exercise stock options, take bonuses, or distribute dividends to owner-managers from a corporation, where feasible, in 2023 rather than 2022.

You may also wish to know about upcoming changes to tax laws that could affect you. Some tax measures were proposed during the 2022 budget that when implemented in 2023, may increase your future taxes. For example, the proposed tax measure to tax residential properties held for less than one year as business income subject to full taxation rather than the current capital gains tax treatment at 50% taxation.  It is also possible the NDP might persuade the minority Liberal government to implement some of the NDP election promises, such as increasing the top marginal tax rate by 2% to 35% (from 33%) or increasing the inclusion rate for capital gains from the current 50% rate to perhaps 75%.

You may consider recognizing these types of income now, where practicable, before any new measures that could increase your taxes may come into effect.

Some new tax credits were also proposed in the 2022 budget that may lower your future taxes when implemented in 2023. For example, the Liberals have proposed a 15% Multigenerational Home Renovation tax credit on up to $50,000 in renovation and construction costs if you add a secondary unit to your home so a family member can live with you. You may consider delaying such expenditures in order to take advantage of this 2023 tax credit.

If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.

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