Giving Feels Good and Other December Tax Tips
Giving makes us feel happy. Giving is good for our health. Giving promotes cooperation and social connection. Giving evokes gratitude. Giving is contagious.
December is a good time to top up your charitable donations. It’s like having the federal and provincial governments match your donations.
Your first $200 of donations save about 26% of tax ($100 donation saves $26 in taxes payable); once you donate more than $200, the tax savings increase to 46%; donate another $200 and now you save $46 per $100.
After you donate $200, by donating another $500, it’s really only “costing” you only about $270. So double up your donations!
If you can financially afford to give to a charitable organization in Canada, I recommend you do so. The organizations can use your help. And you will feel great. Help someone other than yourself. Be “unselfish”.
Make your charitable donations before December 31 so you can use them on your 2021 tax return.
If you have shares or mutual funds that have increased in value in a non-registered account, you can donate some or all of them and not pay taxes on the capital gains if you use an organization like Link Charity (LinkCharity.ca).
A reminder that donations don’t help those with no taxes payable (check if line 43500 was zero for 2020 for both you and your spouse).
I recommend donating locally as much as you can. Find out about charities in your community or in the region, or at least within Manitoba. It feels good to help those that are fairly close to us.
December tax tips
There are a few things you can do before December 31st to save on your 2021 taxes, but don’t wait until the end of the month.
If you are required to make quarterly installment payments, the final one for 2021 is due December 15 2021. If you do not pay them on time or at all, CRA can add arrears interest to any missed or delayed payments. The arrears interest is calculated and added to your tax return when you file next Spring.
If you have medical expenses you will be claiming on your 2021 taxes, maybe spend more before the end of the year so your claim is higher. Top up on prescriptions if you can. Schedule and pay for dental, physio, or chiropractor appointments. Of course medical expenses only help those with taxes payable (line 43500)
Contribute to the family’s Registered Education Savings Plan (RESP) and to the Registered Disability Savings Plan (RDSP) by December 31. The RESP contribution may be important as your children reach 15 or 16 in order to maximize the benefits. Both of these plans allow you to “catch up” on unused contribution room. Talk to your financial institution to find out more.
If you collected EI in 2021 and your total income is more than $70,000, consider buying RRSPs to reduce the EI repayment amount (you have until March 1 2022 to buy RRSPs). Contact us in January or February to estimate your 2021 taxes.
Did you receive CERB or other income replacements that you need to repay? Do so before December 31 so you can claim the deduction on your 2021 taxes.
If you have children under 18 and your family income is under $65,000, buy RRSPs to potentially increase the Canada Child Benefit. Contact us for an estimate of your 2021 family’s income and what the impact may be if you buy some RRSPs before the end of February 2022.
Are you within five years of retirement and contributing to a Spousal RRSP? Maybe contribute by December 31 instead of January or February 2022. If you don’t know why, ask me!
If you turned 65 in 2021 and do not have a private pension plan, convert some of your RRSPs to RRIFs and then withdraw $2,000 before December 31st to take advantage of the Pension Income Credit.
If you are planning a TFSA withdrawal in early 2022, consider withdrawing the funds by December 31 2021, so you do not have to wait until 2023 to re-contribute that amount.
The education credit is normally included on your property tax bill, but if you did not receive the $700 (now $525) credit on your property tax bill, we can claim it on your income taxes, but we can only go back three years! If you need to adjust your 2018 taxes, do so before the end of December.
Other tax tips for 2021:
Remember to get proof of medical premiums for health plans you pay through work or pension (keep the end of year paystub and get a letter from your employer if it just says “insurance”), or if you pay directly from your bank account, you need a receipt.
Medical travel expenses: keep your 2021 wall or pocket calendar or wherever you record all your doctor appointments. Use a medical log sheet to record the dates, doctor’s name, name of clinic or hospital for any appointments more than 40km one way, for a medical service you cannot get locally. If you need a log sheet, drop by our office or call or email us for a copy. If you didn’t keep track of all your medical appointments, you can contact Manitoba Health and get a printout for the year for each family member.
Prescriptions: we recommend you go to your pharmacy in January and ask for a detailed list for the entire 2021 calendar year for each family member. Easier than keeping all those little receipts!
For those that are self-employed: read your vehicle odometer on December 31st and hope you did on December 31st 2020 so you know how many km you drove for the entire year (or use some service records that include your odometer readings to estimate the total km for the year). And we need your recorded log of business-related trips. Start organizing your business receipts by category if you haven’t yet: it will be much easier to do it now rather than when you are nearing the filing deadline of June 15.
For your safety and health, and for ours too, all our staff are fully vaccinated.
Merry Christmas, Joyeux Noel, Frohe Weihnachten, Glaedelig Jul
Your Ste Anne Tax Service team
Anni Markmann is a Personal Income Tax Professional and Certified Financial Planner; living, working, and volunteering in our community. Contact Ste Anne Tax Service at 204.422.6631 or 36 Dawson Road in Ste Anne (near Co-op) or firstname.lastname@example.org