Morris MacLeod Newsletter

Since the last newsletter we had a pretty special weekend with Easton experiencing his first hockey game. He has been talking about it since. When we were leaving he got a pretty special gift, a game puck - thanks Jarrett and Christie! - he held it with both hands the whole walk home and has been trying to use his mini hockey stick to shoot it. Luckily he hasn’t had much success or the house would be a drywall project I’m simply not prepared for.

This time of year feels like a transition, everyone puts their nose to the grindstone in September and when the end of November hits our attention turns to holiday parties and celebrating with friends and family. Generally these newsletters focus on mindset and the approach to Family Wealth Management. Designing your Statement of Financial Purpose and establishing clear and agreed upon roles and responsibilities within the family to support your mission will always be top priority. The elusive “perfect plan” (if it even exists) can be derailed in the execution if it isn’t followed through. However, I’m going to move into a more tactical message today.

With the end of year in mind below is a short year-end reminder list. Feel free to reach out with any questions about the below or if something else is on your mind.

Individuals:

Contributions to Registered Accounts (RRSP, RESP, TFSA etc.)

• RRSP contribution deadline: March 1, 2023
• Annual increase in the TFSA contribution limit takes effect: Jan 1, 2023. Limit is $6,000 for 2022 and $6,500 for 2023
• RESP contribution deadline: December 31, 2022
• Check your RRSP, TFSA and RESP contribution limits by logging into your My CRA account, or check last year's Notice of Assessment

Review your emergency fund

• There are rules-of-thumb for how much you have set aside, but in all honesty it depends on your own financial situation. A high risk entrepreneur may have a goal of a years living expenses, while a salaried employee may have a goal of a couple months. Reviewing this account on an annual basis keeps you aligned with your goals and planning.

Charitable donations

• Making a charitable donation is one of the ways you can significantly reduce the personal tax you pay. The final day to make contributions to a registered charity in order to claim the donation tax receipt on your 2022 income tax return is December 31, 2022.
• As an alternative to cash, you can also donate publicly listed securities in-kind to qualified charities without being subject to tax on the realized capital gain. You will receive a donation tax receipt equal to the fair market value of the security at the time of the donation, which can help reduce your total tax liability.

Business Owners:

Shareholder loans

• If your business is incorporated and the corporation loaned you money, ensure the loan is repaid before the end of the corporation’s tax year after the year the loan was granted to avoid having to include the value of the loan as income on your personal tax return.

Pay salaries before year-end

• If you operate your own business, consider paying additional salary or bonus to yourself, and reasonable salaries to family members who work in the business, before year-end. This year-end payment constitutes earned income, which may create RRSP contribution room for the following year. The payment will also give your business a tax deduction. The salary paid must be reasonable based on the services performed by your family member. A good rule of thumb is to pay your family member what you would pay someone who isn’t related to you for the work performed in the business.

Declare bonuses before year-end

• If your business is incorporated and you want to decrease corporate income without increasing your personal income in the current tax year, consider declaring a bonus before the end of your corporation’s tax year, and pay the amount before 180 days after the corporation’s yearend. This will ensure your business will get a corporate deduction for the current year.

Purchase assets for your business

• If you intend on purchasing assets for your business (i.e., a computer, furniture, equipment, etc.), consider making this purchase before year-end. If the asset is available for use, this year-end purchase will allow your business to deduct capital cost allowance (CCA) which represents depreciation on the asset for tax purposes. For most assets, half of the regular allowable CCA can be claimed for tax purposes in the first year of an asset purchase, regardless of when it was actually purchased during the year.

I hope these topics are helpful. If something triggered more questions I’m very happy to have a talk about your individual situation.