Tax and Protection
Four tax and financial planning to-dos before the end of 2024
By ATB Wealth 18 November 2024 3 min read
Not all tax deadlines come around in February. There are a few important items to consider and take care of before the end of each calendar year. Here are our top four tax and investment opportunities that can support your planning and help set you up for success in 2025.
1. First Home Savings Account (FHSA) contributions
The FHSA is a relatively new registered plan available to Canadian residents aged 18 or older that allows first-time home buyers a tax-advantaged option to save for the purchase of a home. Contributing to a FHSA is a tax-efficient way to save for your first home, as contributions are tax-deductible, while qualifying withdrawals (including withdrawals of any investment earnings or growth in the account) are tax-free.
FHSAs have a lifetime contribution limit of $40,000. Beginning in the year you open an FHSA, $8,000 is added to your FHSA participation room. If you contribute less than the FHSA participation room for a year, the unused portion is your FHSA carryforward, which is added to your FHSA participation room for the following year. The maximum amount of unused FHSA participation room that can be carried forward to a subsequent year is $8,000.
If your financial goals include the purchase of your first home, consider contributing up to $8,000 to an FHSA before Dec. 31. Even if you don’t have funds available to invest in 2024 but plan to begin your FHSA contributions in 2025, consider opening an FHSA before Dec. 31, 2024 to maximize your FHSA participation room for the future.
2. Registered Education Savings Plan (RESP) contributions
Contributing to an RESP is a tax-efficient way to save for a child's education. The Canada Education Savings Grant (CESG) is available from the federal government and will match up to 20% of the first $2,500 of contributions each year, equal to $500 per beneficiary, per year. Consider making an RESP contribution by December 31 if you have not already maximized the current year's CESG. Families with low income may be eligible for additional government incentives.
Video: Source: ATB Wealth
3. Your employee benefits
If you are a member of an employee benefit plan ensure you access all the benefits available to you by the end of the year. If you have unused funds that you can use for you or your family’s health and wellness (dental, optical, prescription drug plan, paramedical services, wellness programs) the credits will often expire at the end of the year. Use these credits before they expire.
Year-end planning is also required when choosing your group benefits for the upcoming year. If you are a member of a group savings or pension plan, choose a contribution amount that maximizes any company matching contributions. Review any investment choices that you have made and ensure your investments are in-line with your long-term savings goals. Spend time reviewing the options for dental, optical, insurance (life, disability, critical illness) and health and wellness coverage for the upcoming year. If your spouse or common-law partner is also a member of an employee benefit plan, understand how the two plans can work together to provide the best coverage for your family.
Whether it’s insurance, health and dental benefits or your company’s pension or savings plan, these are part of your compensation package and year-end is a great time to review your situation and ensure you are maximizing the benefits available to you and your family.
4. Charitable donations
To be eligible to receive a tax credit for the 2024 tax year, charitable donations must be made by Dec. 31, 2024. For Alberta residents, the 2024 combined federal and provincial charitable donation tax credits will represent 75% on the first $200 donation in the year, 50% on donations in excess of $200 (where the taxpayer is not in the top federal marginal tax bracket) and 54% on donations in excess of $200 (where the taxpayer has sufficient income above $246,752).
For more information on this topic including helpful examples, refer to our article, ‘Tis the season for charitable giving.
Additional year-end planning tips
Want to learn more? Our Year-end Tax Planning Guide provides additional tax planning tips and important dates for:
- Tax-Free Savings Account (TFSA) withdrawal planning
- Registered Disability Savings Plan (RDSP) contributions
- Registered Retirement Income Fund (RRIF) planning
- In-kind donation of securities to charity
- Capital gains inclusion rate
- Tax-loss selling
- Interest payments
- Reducing your withholding tax at source
With the end of 2024 quickly approaching, an ATB Wealth financial advisor can help you use these and other investment strategies to achieve your financial goals and objectives.
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