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The holiday season is here again, which means it’s time for advisors to reconnect with clients on ways they can reduce their tax bills. And given the rising cost of living and ongoing economic uncertainty – year-end tax planning is even more important for many Canadian households this year.

In a recent LinkedIn Live event, Globe Advisor reporter Brenda Bouw spoke with Wilmot George, head of tax, retirement and estate planning at CI Global Asset Management in Toronto, about some year-end tax planning strategies advisors should discuss with clients.

Here’s a summary of what Mr. George had to say:

A common year-end strategy is tax-loss selling. How can it be used to a client’s advantage?

Generally, you don’t want to sell a security when the market is down, but sometimes, it can make sense, particularly when you have realized capital gains from other areas of your portfolio. You can use capital losses to offset capital gains to pay fewer or no taxes. A net capital loss in a year can be carried back three years or carried forward indefinitely to apply against capital gains for those years. With tax-loss selling, the selling transaction must settle on or before the last business day of the year. It’s worth noting that 2023 is the last year to trigger net capital losses carried back from 2020.

Investors also need to be mindful of the superficial loss rule. Let’s go over that briefly.

You can’t talk about tax-loss planning without talking about the superficial loss rule. The Canada Revenue Agency’s ‘superficial loss’ rule states investors can’t claim a capital loss on the sale of an investment if they – or anyone affiliated with them, such as a spouse, common-law partner or certain affiliated trusts – buy back the same investment within 30 calendar days before or 30 calendar days after the disposition – so there’s a 60-day window. Investors need to be mindful of the superficial loss rule and avoid it if the goal is to benefit from a capital loss for the year.

Another popular year-end strategy is charitable giving. Let’s talk about the opportunities here and anything new investors need to consider.

Charitable donations can be an effective way to reduce your tax bill. They can create credits of up to 54 per cent, depending on the donor’s income, the province or territory where they live, and the amount donated. Donations of publicly traded securities made directly to charities, known as ‘in-kind’ donations, can further increase your tax savings because the capital gains inclusion rate is zero per cent. Canadians who want to take advantage of this strategy will want to get their donations in before year-end to claim it on their current year’s tax return.

The federal government has proposed to adjust the alternative minimum tax (AMT) that could impact how high-income individuals donate to registered charities. The proposed rules say only half of the donation tax credit can be applied against the AMT, down from 100 per cent. It’s a more complex conversation, but clients who might be affected are advised to consult their tax advisors about the potential impact. In some cases, if those rules are introduced in 2024, as is proposed, it might make sense to make certain charitable donations before the end of this year to be taxed subject to the current regime.

– Brenda Bouw, Globe Advisor reporter

This interview has been edited and condensed. The entire interview can be viewed here.

Must-reads from Globe Advisor this week

How appointing a trusted contact person can help pinpoint client difficulties

Since the Canadian Securities Administrators mandated financial advisors to recommend clients fill out a trusted contact person (TCP) document for all financial accounts a few years ago, uptake has been positive, advisors say. Unlike a power of attorney, a TCP is not somebody who makes financial decisions on the client’s behalf in case of mental incapacity. But if the advisor is having difficulty reaching a client and their power of attorney, the TCP is the next point of contact and can provide the advisor with a check-in of the client’s whereabouts and well-being. Deanne Gage has more.

The difficult upbringing that kept this advisor from buying a home until age 55

In this new series, Behind the Advice, we ask advisors about their relationship with money from a young age, lessons learned over the years, and how their experiences influence the advice they give clients today. Brenda Hiscock, certified financial planner at Objective Financial Partners Inc. in Cobourg, Ont., discusses growing up in poverty, being an alcoholic and the emotional turmoil that kept her from buying a home until a few years ago. As told to Brenda Bouw.

Why this $4-billion money manager is buying Alphabet and selling Johnson & Johnson

Kash Pashootan says there’s no question a recession is coming; rather, it’s how deep it will be and how long it will last. “We don’t think the economy has felt the full impact of the rapid rise in interest rates yet – and believe it will worsen in the next six to nine months if central banks don’t cut interest rates early in the new year,” says Mr. Pashootan, founder and chief executive officer of First Avenue Investment Counsel, which has offices in Ottawa and Toronto. Brenda Bouw asks what he’s been buying and selling.

How business owners can utilize the lifetime capital gains exemption as it surpasses $1-million in 2024

The lifetime capital gains exemption (LCGE) for qualified small business corporations is about to hit a milestone. As of 2024, the LCGE amount indexed to inflation will rise to more than $1-million for the first time. Inflation caused the LCGE to soar in the past few years, notably to $971,190 this year from $913,680 in 2022. The new 2024 LCGE rate of $1,016,836 translates into even more sheltered taxable money for incorporated small business owners who have sold their business shares. Deanne Gage provides more details.

Also see:

Four mistakes to avoid when getting a car loan

How does employer-sponsored health coverage fit into financial planning?

Can the magnificent seven tech stocks continue winning in 2024?

Small caps are down but not out – here’s why they’re set to outperform

What to watch for in the Fed’s last interest rate decision of 2023 in this week’s Advisor Lookahead

What you and your clients need to know

Canadians are paying the highest portion of disposable income toward debt on record

Canadians are directing a record portion of their disposable income to debt payments, a sign of increasing financial pressure on households after an abrupt end to near-zero interest rates. The household debt service ratio – measured as total obligated debt payments as a proportion of disposable income – rose to 15.22 per cent in the third quarter, said Statistics Canada in a report Wednesday. The latest figure is up from 15.08 per cent in the second quarter and marks the highest ratio in records that date back to 1990. And it’s likely that the financial strain on Canadian households will worsen, given that many homeowners have yet to renew their mortgages at higher interest rates. Matt Lundy reports.

A new frontier in parenting costs is helping your homeowning kids afford their mortgage

If you want to start a lively conversation this holiday season, ask parents what kind of financial help they provide to their Gen Z or millennial kids. We’ve seen a progression in this type of help in the past 10 years, from covering cellphone bills to welcoming adult kids back home to live temporarily to providing money for home down payments. The next stage is helping adult kids afford to live in their homes. Among the parents who provided financial help, the dollar amounts were substantial. Roughly 20 per cent gave up to $10,000 and another 20 per cent gave between $10,000 and $25,000. Just more than 28 per cent gave $100,000 or more. Rob Carrick has more.

Manulife strikes deal to reinsure $13-billion of risk on its books, freeing up capital for share buyback program

Manulife Financial Corp. has signed a deal with Global Atlantic to reinsure more than $13-billion of risk on its books, freeing up about $1.2-billion in capital that will be used for future share buybacks. Global Atlantic and its partners will reinsure four separate blocks of business, including $6-billion of the company’s reserves for its long-term care business, representing 14 per cent of the insurer’s total reserves. The company said the transaction involving the long-term care block is one of the largest long-term care reinsurance deals ever done. Clare O’Hara provides more details.

– Globe Advisor Staff

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