In the holiday season, people tend to spend a bit more money, subconsciously trying to finance specialness. Fair enough — but this is exactly why it’s crucial to be on top of one’s financial game going in to this time of year. Don’t get caught with empty pockets post-NYE: ’Tis the season to be savvy, with a few end-of-year financial tips. There’s nothing jaded or Scroogey about making your generosity work for you — just remember that it’s uncouth to brag about how much you saved*, big spender.

Charitable giving
At holiday time, many of us already feel the need to give to those less fortunate. There are plenty of programs available through non-profits that allow you to make a donation and adopt a farm animal for a family in need, or help pay for an important community project, and then give that contribution as a gift to another person. Charitable giving makes a great present and grants someone less-fortunate a more hopeful holiday. In many cases,  the money you donate can qualify for a tax credit; be sure to use an approved organization. For more details on the latter point, visit the CRA website.

Turn an obligatory family vacation into a deductible business trip
If you’re self-employed, a commissioned employee or are otherwise not reimbursed for business-related travel expenses and are headed out of town over the holiday, there may be some ways to add value to that money you’re going to spend anyway. Schedule some interviews or client meetings at your destination, and log some hours doing administrative work. If you can make the trip part business, even a small part, some of your more significant expenses may be deductible. Bear in mind that there are very specific restrictions on certain types of deductions (ie. automobile expenses); don’t make reckless claims.

Consider taking investment losses before the close of the year
As the end of the individual tax year approaches, consider shaking some non-performing investments for a loss, in hopes of reinvesting more wisely next year. Canadian tax law allows a taxpayer to offset capital gains with capital losses, if the overall capital losses exceed the overall capital gains. Rather than being deductible from income, the loss is put into a ‘carryover pool,’ which can be used to offset gains from the preceding three years or any following year. Just make sure you don’t plan on repurchasing the same investment within 30 days, or it may be qualified as a ‘superficial loss transaction,’ negating any tax benefit. (To be clear: You cannot repurchase the same security until 30 days after the settlement date of the disposition, nor can you hold that security on the 30th day after the disposition’s settlement date.)

Retirement plans
If you feel good about your cash position and would like to see a further reduction in your tax obligation, find out whether you’ve maxed your allowable retirement contributions. The CRA offers guidance regarding RRSP contributions; you can also consult your employer’s HR department and/or retirement plan provider to find out if you are contributing as much as allowable towards a maximized deduction.

Deferring income
If you are self-employed and your business is its own corporate entity, it may be smart to defer your end-of-year bonus or other compensation until your individual tax year ends.  If you are not self-employed, you may be able to negotiate something like this with your employer (who might respect your financial forethought). For instance, if your corporation uses a July-June tax year, but your own ends in December, paying yourself that bonus in January wouldn’t really affect your annual corporate taxes, but could provide your individual tax situation some much-needed relief to make up for a costly holiday season.

*For every suggestion listed above, consider consulting with a tax professional to determine if you qualify for additional options beyond the ones you already know about. It’s an extra expense, but one in keeping with this article’s theme: Get spending to yeild saving.

——————–
Image courtesy of Rob Sombilon Gallery.