Three Crucial Tax Adjustments to Keep in Mind Before the Year Ends
Usually, people only think about taxes during the tax season; however, it's crucial to keep them in mind towards the end of the year. Here are some unique factors to consider for your 2023 tax planning before the year concludes.
1. Utilizing Tax-Loss Selling
Due to a decline ranging from 12 percent to 15 percent year-to-date in real estate, communication services, and utilities sectors in 2023, this could be an ideal time to implement tax-loss selling. This practice entails liquidating investments that have accumulated losses in non-registered accounts to counterbalance capital gains incurred elsewhere in your financial portfolio. Any unused net capital losses can be carried back three years or carried forward indefinitely for balancing net capital gains in other periods.
2. First Home Savings Account Initiative
Over 250,000 Canadians have launched a First Home Savings Account (FHSA), a tax-free savings avenue, for financing their first home down payment. If you are residing in Canada, aged 18 or older and purchasing your first house, FHSAs enable you to save for this purpose tax-free. You can contribute up to $8,000 annually (with a maximum limit of $40,000) towards your primary down payment savings. All withdrawals made for buying qualifying properties, as well as any returns on investment or account growth earned, are non-taxable.
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3. Impending Alterations to Alternative Minimum Tax (AMT)
It is prudent to prepare for upcoming changes in the Alternative Minimum Tax (AMT) system that will become effective starting January 1, 2024. The AMT sets an obligatory tax amount on individuals who use specific tax deductions, exemptions, or credits to minimize their taxes significantly. Changes include raising the AMT rate along with increasing the AMT exemption while restricting particular exemptions, deductions and credits.
For those with substantial planned charitable contributions, the 2024 AMT calculations' forthcoming modifications may impact you. The allowed donation tax credit when calculating AMT will decrease from 100% to 50%.
We hope you have found this summary useful and informative.? We help businesses of all sizes and types with their accounting and tax needs.? We would be pleased to hear from you.
Mahdi Songhori, MAcc
AMACC