Pay amounts eligible for deduction or credit prior to December 31
Many items which are creditable or deductible for tax purposes must be paid by the end of the year. These amounts include alimony and maintenance, child care expenses, investment counsel fees, professional dues, charitable donations, medical expenses and political contributions.
Donations of shares
Gifts of certain publicly-traded securities are not subject to capital gains tax. Where certain conditions are met, employees who donate certain securities acquired through a stock option plan to a qualifying charity may deduct a portion of their taxable stock option benefit. Specifically, when combined with the regular stock option deduction of 50%, none of the stock option benefit will be taxed when shares are gifted. An employee may also be allowed to deduct a portion of their stock option benefit if the proceeds from the disposition of the securities acquired through the stock option plan are donated.
The capital gains tax exemption also extends to capital gains realized on the exchange of certain unlisted securities for publicly-traded securities, when the publicly-traded securities are then donated within 30 days of the exchange.
Consult with your BDO advisor for further details on how these measures apply.
Pay for medical expenses and charitable donations in one year
There is usually an added benefit if payments for charitable donations for two years are grouped into one year. This is due to the fact that the first $200 of donations is eligible for a 15% federal non-refundable credit in 2011 while the excess over $200 is eligible for a 29% credit. You’ll receive a slightly larger credit if you group two years of donations in one year.
In the case of medical expenses, only amounts in excess of $2,052 (limit may vary by province) or 3% of net income (whichever is less) are eligible for a credit. Note that in Québec, eligible medical expenses must be reduced by 3% of family income. If your medical expenses for the current year are already in excess of the threshold, consider paying for additional expenses which are expected to arise in the near future now. Although most medical expenses are only paid as the medical services or supplies are required, some types of expenses can be paid for in advance such as glasses or contact lenses. You may want to consider this if it helps you to get a larger credit. If you’re paying for a major expense on an instalment basis (such as braces for a child), consider paying the balance owing early to maximize your medical credit claim.
Next section: Other year-end planning
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