Blog: Go Tax Somebody Else

Before the end of this calendar year, our firm will have looked at each client’s non-registered account to minimize a future tax bill.

If a non-registered account has recorded realized capital gains at any point during 2022, there will be tax consequences next spring. To offset these taxes, we always consider selling securities with unrealized capital losses. Doing so will help to neutralize any capital gains. Any securities sold to realize a capital loss can be repurchased 30 days later. Otherwise, the “superficial loss rule” will prevent the person from recording the loss for tax planning purposes.

Each client is different and requires an individual assessment.

For example, one client may have carry-forward losses, in which case realizing capital losses may not be required. Another client may prefer to pay the taxes on profits made during the year rather than wait for 30 days to repurchase a stock that could run up in the meantime. Others may want to sell a stock with a loss but buy a competitor whose share price will likely move in tandem with the stock we sold.

Needless to say, we discuss these options with the client before executing any trades.

Once we complete our tax planning for clients in 2022, we’ll look onwards to 2023.

On January 1, 2023, the TFSA contribution limit will increase by $500 per annum to $6500 per year. For someone who was eligible to contribute to the account since it was introduced in 2009, the cumulative contribution room will become $88,000 on January 1. As the name of the account implies, any realized gains, dividends, or interest payments received are all sheltered from taxes. Unused contribution room rolls forward to future years.

The RSP deadline is on March 1, 2023. You are allowed to contribute the lesser of the following two amounts: (1) 18% of your earned income from the previous year, which is usually found on box 14 of your T4 slip, or (2) the maximum annual contribution limit for the taxation year, minus any company sponsored pension plan contributions. Unused contribution room rolls forward to future years.

Each January, we will reach out to each of our clients individually with information about their TFSA contribution room and, if applicable to the client, remind them of the RSP deadline.