Key takeaways:

  • Tax planning requires attention year-round, not just during the spring tax season.
  • Note key deadlines in your calendar so you don't miss out on tax credits or deductions.
  • If you're eligible, consider opening a First Home Savings Account (FHSA).
  • Look at whether deferring deductions on RRSP or FHSA contributions may increase tax savings.
  • Make the most of TFSAs and RESPs through deliberate timing of contributions and withdrawals.

Taxes may not be top of mind as you enjoy the festive season. But a little bit of advanced prep now, could help you come tax time in the spring, according to Robbie Brown, director of Advanced Planning and Services and the head of Wealth Management Taxation at Scotia Wealth Management.

“Planning is key," he says. “And tax planning, like all wealth planning, is great to do throughout the year."

The end of the year can be a particularly good time to review your annual tax plan as certain deadlines approach. To help you with everything from scheduling payments and contributions, to maximizing government grants and leveraging Canada's newest registered account, check out Brown's tips that he shared on the Scotiabank Perspectives podcast in November.

Click for the podcast transcript

Mark key dates on your calendar

Missing important tax deadlines can cost you in late penalties, interest or lost tax deductions or credits. Be sure to take note of the following dates so you can schedule transactions accordingly.

December 15, 2023

  • Payment deadline for final 2023 quarterly income tax installment. This may apply to anyone with sources of self-employment, investment or pension income that isn't taxed at the source, and who pays quarterly tax installments throughout the year.

December 27, 2023

  • Last day to complete a trade for it to settle in 2023. 
    “If you are engaging in any sort of tax-loss selling and wanted a transaction to settle in 2023, you would need to execute it on that day," says Brown.

December 31, 2023

February 29, 2024

  • 2023 Registered Retirement Savings Plan (RRSP) contribution deadline for allowable deductions on your 2023 tax return. Why isn't it March 1, like previous years? “The rule states that the deadline is 60 days after the end of the year," Brown says. "Because we have a leap year this year, 60 days is February 29."

April 30, 2024

  • 2023 T1 personal income tax return filing deadline. Submit your return and pay any taxes owed by this date to avoid penalties or interest charges.

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Open a First Home Savings Account (if you're eligible)

This new registered account allows Canadian resident adults (18+) to contribute up to $40,000 — tax free, over a 15-year period — for the eventual purchase of their first home. Note: for First Home Savings Account (FHSA) purposes, you're considered a first-time home buyer if you or your partner have not lived in a qualifying home during the year or any of the past four calendar years.

Once you open an FHSA, you can contribute up to $8,000 annually. Contributions to an FHSA are tax deductible, and all withdrawals made to purchase a first home are tax free.

Even if you aren't in the market for a new home, you may still benefit from opening an FHSA before the end of the year, Brown says.

“If you don't end up purchasing a first home within the 15 years that an FHSA can remain open, you can transfer your FHSA contributions plus investment growth to your RRSP — without having any RRSP contribution room," he says. "So, it's almost like bonus RRSP room, if you will."

If you don't have money to contribute right now, but expect to have a significant amount of savings in 2024, opening an FHSA in 2023 makes sense, because there's a maximum carry forward on contribution room of $8,000.

“If you opened an FHSA this year and did not contribute, then in 2024 your contribution room would be $8,000 for 2024 plus $8,000 for 2023," says Brown. “So, you could max out at $16,000 in 2024."

Be strategic with RRSP deductions

Any amount you contribute to an RRSP by Feb. 29, 2024 (up to this year's annual limit of $30,700 plus any available carryforward room), can be deducted from your taxable income when you file your 2023 return. Note your annual contribution limit will depend on your personal contribution limit which you may find on your most recent Notice of Assessment received from the Canada Revenue Agency (CRA) or on your My Account on the CRA’s website.

Of course, this is actually a tax deferral — you eventually pay taxes when you draw those funds in retirement. RRSPs can be very helpful when deductions for contributions are made during your highest-income years, when your marginal tax rate is relatively high compared to what it might be during retirement.

But remember, you don't have to claim an RRSP deduction on your contributions right away — the deduction can be carried forward into any future year.

“You could hold it and then use it in a year, say, when your income may be higher and that tax deduction would be possibly generating a refund at a higher marginal rate," says Brown. He notes, “Whether you get a tax refund immediately and then use that tax refund to fund your lifestyle or further invest should be factored into that consideration with your wealth advisor.”

Tax deductions on FHSA contributions can also be carried forward indefinitely, he adds. And in the meantime, you still benefit from the tax-sheltered investment earnings and growth that an RRSP offers.

Time your TFSA transactions

There's no tax deduction to consider when you contribute to a Tax-Free Savings Account (TFSA) — instead, you get to withdraw the funds and all the investment earnings and growth tax free. Still, there are a couple of ways to get the most bang for your TFSA buck, Brown says.

First, if you can, max out your TFSA each year as soon as you have new contribution room. “If you can contribute to your TFSA in January or February, you're going to benefit from that year's growth," he says. "Whereas if you contribute later in the year, you would have possibly missed out on 10, 11 months of growth."

Second, if you're looking at a big expense in 2024 and considering spending money from your TFSA, you may benefit from withdrawing the funds before December 31. That's because you regain contribution room on TFSA withdrawals on January 1 of the following year.

“If you withdraw between now and the end of 2023, that room will get reset January 1, 2024," says Brown. “So, if you have the capability of doing so, you can put money back in your TFSA and continue to earn tax-free growth."

Make the most of RESPs

RESPs are beneficial not only because the investment income and growth earned within them are tax deferred, but also because you can get a 20% return in the form of the Canada Education Savings Grant (CESG) on the first $2,500 of annual contributions. The maximum lifetime RESP contribution per child is $50,000, and the maximum lifetime CESG per child is $7,200.

In other words, to get the full $7,200 grant, generally, you'd have to contribute $2,500 per year for 14 years and then $1,000 in the 15th year — or $36,000 in total contributions. That still leaves $14,000 worth of contribution room, which Brown highlights you may consider front-loading in the first year if you can.

“Frontloading an extra $14,000 in year one allows that money to grow tax deferred for upwards of 17, 18, 19, 20 years or longer, depending on when the beneficiary pursues post-secondary education," he says. “So, if you have the ability to do so, this is a strategy that we employ with clients to take advantage fully and really maximizing and utilizing an RESP."

Look at the full picture of your finances

When it comes to financial planning and deciding which registered accounts to prioritize, it's always a good idea to look at the big picture of your specific situation. Be sure to consider your marginal tax rate (both now and in the future), your ability to maximize contributions to each account, and when you expect to tap into your savings.

“It's really about taking a look at it from a holistic perspective with your tax and wealth advisors and determining with good planning what makes the most sense given your particular facts and circumstances," says Brown.

Bottom line

Whether you're eyeing that dream home, aiming for a cozy retirement or securing your child's education, a bit of savvy tax planning can make a real difference. Remember, it's not just about April deadlines — taxes are a year-round game. So, consult with your wealth and tax advisors and consider the above tax planning tips to avoid leaving tax savings on the table.

Learn more great tax planning tips here.

Ready to get your finances on track for your future? Come in and speak to a Scotia advisor today