Checklist 2023:

If you've realized capital gains in 2023 or in one or more of the last three years, consider selling assets with an accrued loss to offset these gains. To include a disposition of marketable securities in your 2023 tax year, you need to sell them on or before the stock exchange's last trading day for settlement in 2023. The last trading day for settlement in 2023 will generally be Dec. 27 for Canadian exchanges. For other transactions, legal ownership must be transferred before the end of the year.

If you do decide to undertake a tax-loss selling strategy, you should be aware that rules (known as the superficial loss rules) may apply to deny losses on certain dispositions of property. In particular, the loss will be denied if you, or your spouse/common-law partner, or a company you or your spouse/common-law partner control repurchase the asset you disposed of for a loss within 30 days of the disposition.

Many items that are creditable or deductible for tax purposes must be paid by the end of the year. These amounts include alimony and maintenance, childcare expenses, investment counsel fees, professional dues, charitable donations, medical expenses, and political contributions. To ensure that you will benefit from the tax deduction or credit in 2023, be sure that you pay these amounts by Dec. 31.

Consider donating securities

If you plan to donate money to a registered charity, you should consider donating publicly listed securities you own instead of cash. If there is an accrued gain on your securities, donating the shares directly to the charity can save on capital gains taxes that you would otherwise incur. For more information on this tax planning strategy, read our article How donating securities to charity saves you tax.

In addition, changes to the Alternative Minimum Tax (AMT) are expected to come into effect in 2024. While the donation of publicly listed securities will normally result in no capital gain for income tax purposes, the proposed changes to AMT include 30% of the capital gains on publicly listed securities in the calculation used for alternate minimum taxable income. In addition, under the AMT proposals, there will be a reduction of the donation tax credit allowed in calculating AMT to 50% of the credit otherwise allowed. This means that for individuals considering making significant charitable donations, it may be advisable to consider doing so in 2023 when the current rules would not create an AMT issue. To see how the new rules could impact you, read our article: Alternative Minimum Tax changes are coming, and speak with a BDO tax advisor.

Manage your medical expenses

In the case of medical expenses, only amounts exceeding $2,635 (limit may vary by province or territory) or 3% of net income (whichever is less) are eligible for a credit. In Quebec, eligible medical expenses must be reduced by 3% of family income.

If your medical expenses for the current year are already over the threshold and you anticipate that you won't have medical expenses above next year’s threshold, consider paying now for additional expenses that will arise in the near future.

Although most medical expenses are only paid as the medical services or supplies are required, some can be paid in advance. Glasses and contact lenses are two common examples. If you're paying for a major expense such as braces on an instalment basis, consider paying the balance owed early to maximize your medical credit claim.

On the other hand, you may have no medical expenses that can be paid in advance. In that case, keep in mind that you can claim eligible medical expenses paid in any 12-month period ending in a given year. To further clarify, consider the following scenario:

• your medical expenses incurred in the 2023 calendar year don't exceed the threshold,
• you need major dental surgery,
• those dental procedures will run from October 2023 to March 2024,
• the total cost will be about $5,000, split evenly between 2023 and 2024; and
• your other eligible medical expenses will total about $1,000 in each of 2023 and 2024.

In this scenario, you wouldn't claim any medical expenses in 2023, and you could choose the 12-month period ending on Sept. 30, 2024, as the period to claim medical expenses on your 2024 income tax return. You can then claim all of the dental expenses incurred over the annual threshold, plus the other $1,000 of regular medical expenses incurred in the 12-month period ending Sept. 30, 2024. Note also that medical expenses eligible for the tax credit evolve over time, and you should check the CRA website for a list of common medical expenses that qualify for the credit.

The new residential property flipping rule aims to ensure profits from the disposition of a residential property that was owned for less than 12 months will be deemed to be business income and taxed as such. The resulting disposition will not be eligible for the 50% capital gains inclusion rate or the principal residence exemption. This same rule will prevent claiming capital gains treatment on the disposition of a right to acquire a housing unit located in Canada. If a disposition of flipped property results in a loss, that loss will be denied and cannot be claimed as a business loss.

Some exceptions apply relating to certain life events such as death, separation, household addition, illness, employment change, insolvency, personal safety, and involuntary disposition.

The new rule applies in respect of dispositions that occur on or after January 1, 2023. This means that under the new rule, the purchase and sale of a residential property within a year would automatically be taxed as business income; unless an exception applies. Where the new rule does not apply, such as when the property was owned for over a year, whether the gain is taxed as business income or a capital gain, and whether the principal residence exemption may be available, remain a question of fact. A BDO tax advisor can help you understand the tax consequences.

The Tax-Free First Home Savings Account (FHSA) is a new registered account that allows eligible first-time home buyers to save for the purchase of a home on a tax-free basis. Contributions to an FHSA will be tax deductible (like a registered retirement savings plan, RRSP) and qualifying withdrawals to purchase a first home would be non-taxable (like a tax-free savings account, TFSA). There is a lifetime limit on contributions of $40,000, with an annual $8,000 contribution limit beginning in 2023. For contributions to be deductible this year, they must be made by Dec. 31.

To find out if you or your child may be eligible, read our Q&A: The new tax-free First Home Savings Account (FHSA) and contact your financial institution.

Contribute to your RRSP by the deadline

In order to be deductible for 2023, your registered retirement savings plan (RRSP) contribution must be made on or before Feb. 29, 2024. If you want to know how much you can contribute for 2023, check your RRSP contribution limit either on your 2022 notice of assessment, online using the CRA's My Account service, or the MyCRA mobile app.

Your contribution limit for 2023 is 18% of your 2022 earned income (to a maximum of $30,780) minus your 2022 pension adjustment, if any, plus any RRSP room carried forward from prior years.

Collapse your RRSP in the year you turn 71

Also, remember that if you turn 71 on or before Dec. 31, 2023, you must collapse your RRSP by the end of the year. At that time, you can pay tax on the fair market value of the plan's assets, purchase an annuity, or transfer your RRSP into a registered retirement income fund (RRIF). No tax is paid at the time of the purchase of the annuity or at the time of conversion into an RRIF. Note that despite collapsing your own RRSP, you may still be able to contribute to a spousal or common-law partner RRSP, provided that such contributions are made no later than the end of the year in which your spouse or common-law partner turns 71.

Sell non-qualified investments in your RRSP

There are specific rules as to the types of assets your RRSP can hold. If you have a self-directed RRSP, you may have purchased assets that don't qualify, referred to as non-qualifying investments. Qualified investments generally include money, guaranteed investment certificates, bonds, mutual and segregated funds, and securities listed on a designated stock exchange.

If non-qualifying investments are acquired or existing investments become non-qualified, a tax equal to 50% of the amount of such investments will apply to the RRSP holder. Where the non-qualifying investment is disposed of, the tax will be refunded if certain conditions are met. If the purchase and sale are in the same year, the tax and the refund will generally be offset. If you find that you have non-qualifying assets in your RRSP, it will be beneficial to dispose of the non-qualifying assets before Dec. 31.

If you participated in the Home Buyers' Plan (HBP) prior to 2022, you may have a repayment due in the 2023 taxation year. Generally, you have up to 15 years to repay the HBP loan from your RRSP. The CRA issues an annual HBP statement of your account, and your required repayment amount will be shown on that statement. Your 2023 minimum repayment amount will be shown on the statement, which would have been received with your 2022 notice of assessment.

If the minimum repayment isn't made, you will be required to include the shortfall from the minimum payment in your income. To ensure the minimum annual HBP repayment isn't included in your taxable income for 2023, the required amount must be repaid to your RRSP on or before Feb. 29, 2024.

A repayment can be made by making a regular contribution to your RRSP. Repayments to your HBP don't affect your RRSP deduction limit. This means that you can still contribute to your RRSP and designate that amount as a repayment under the HBP, even if your RRSP deduction limit is zero.

If you entered into an income-splitting arrangement with family members by loaning your personal after-tax funds to a spouse or common-law partner, a minor child, or a family trust at the CRA's prescribed rate in effect at the time the loan was made, you should ensure that you pay the interest before Jan. 30, 2024. If the interest isn't paid on time, the loan will be subject to the attribution rules and the income earned by the family member who received the loan will be taxed in your hands.

Also, if you received a low-interest loan from your employer during any point in the year, you should ensure that interest is paid before Jan. 30, 2024, in order to avoid a deemed taxable employment benefit. This benefit will also be calculated at the CRA's prescribed rate for the period that the loan was outstanding, minus any interest actually paid. The CRA's prescribed rate for these loans increased from 3% to 4% on Jan. 1, 2023, and to 5% on Apr. 1, 2023, where it will remain at least until Dec. 31, 2023.

Note that if you received a loan by virtue of your shareholdings rather than employment, a different set of rules will apply. In addition, the expanded tax on split income rules could affect loans from private corporations to certain family members. If you or your family members borrowed money from your corporation, contact your BDO advisor to discuss whether there are any income tax implications arising from the loan.

If your employer provides you with a company car, a taxable benefit will be included on your T4 slip.

The actual benefit is made up of two parts:

• A standby charge for making the automobile available for your use. It's calculated based on a percentage of the original cost or the monthly lease payments for the automobile. This benefit is calculated on a daily basis for each day that the car is made available to you. As such, to lower the amount of the taxable benefit, you should consider reducing the number of days between now and the end of the year that the car is available to you, and limit personal driving so that no more than 50% of your total driving for the year would be considered personal driving.
• An operating benefit that applies if your employer pays the automobile's operating expenses, such as gasoline and maintenance. A portion of the employer-paid operating expenses will be a taxable benefit if you've driven the automobile for personal purposes. In 2023, this benefit is equal to $0.33 per personal kilometre driven.

The standby charge and the operating benefit are reduced by the amounts you pay to your employer. For a standby charge reduction, your payment must be made on or before Dec. 31, 2023. For an operating benefit reduction, you will have until Feb. 14, 2024, to make a reimbursement to your employer to reduce your taxable benefit.

If you're required to pay tax instalments, now is a good time to check to see if you're up to date on your 2023 payments. If you've paid the instalments on the notices sent to you by the CRA for 2023 and plan to make the required final payment by Dec. 15, 2023, you're up to date.

If you paid less than the amount on the CRA notice because you thought that your income for 2023 would be less than 2022, you should check to see if you've paid enough.

If you haven't paid your tax instalments, the CRA will charge you interest at the current rate of 9%. If you find that you haven't paid enough instalments based on your estimated income for 2023, you can make an overpayment on your instalment account to generate an offset to some or all of the interest charges that will otherwise be assessed. Check with your BDO advisor for assistance in making a determination as to whether this is a good strategy for you.

Note that individuals whose main source of income is self-employment income from farming or fishing are only required to make one instalment payment, which is due by Dec. 31.