Tax Planning Opportunities for your 2022 Year End
What a year 2022 has been, and it is already coming to an end! It’s not too late to consider your personal and corporate tax planning, sneak in some tax savings, and be prepared for the upcoming tax season.
Below are some considerations to help manage your tax costs. Metrics CPA can assist you with your tax planning needs by helping you review longer-term objectives and opportunities to enhance tax efficiency to bring about greater overall protection.
You may have taken funds out of your corporation for living expenses or plan on extracting a large sum for other expenses (vacation, home renovations, or anything else). How you withdraw your funds has tax consequences which may not be as straightforward as some might perceive, and the details matter.
It is essential to discuss compensation strategies with your tax advisors. We would be happy to have that discussion with you to determine what’s best for you and how to avoid any pitfalls.
Incorporating your Business
There are many reasons to incorporate. In addition to reducing your tax bill, here are some reasons to incorporate:
- Those that are mining cryptocurrency, high-frequency traders, or are actively margin trading consistently
- Those who earn more in their business than they need personally to live
- Those looking to segregate their personal assets and business
- Those looking for creditor proofing and limited personal liability
- High-income earners or high-net-worth individuals that also have investment income
Speak with one of our advisors to see if incorporating is right for your situation.
Realizing The Losses on Investments
The tax-loss harvesting strategy is a tool that can help reduce your overall tax and may even help recuperate prior year taxes paid. If you had capital gains in 2022, 2021, 2020, or even 2019, you can consider selling assets in a loss position to offset these gains.
Should you choose to undertake the tax-loss strategy you should be aware that rules (known as the superficial loss rules) may apply to deny losses on certain dispositions of property. Essentially, the loss will be denied if you (or your spouse/common-law partner or a company you or your spouse/common-law partner control) repurchase the same or similar asset within 30 days of the disposition.
While tax-loss harvesting may not restore an investment to its previous position, it can lessen the severity of the loss if the strategy is applied correctly and in appropriate situations.
Immediate Expensing for Depreciable Property
Is your company considering acquiring assets in the near future? In that case, you may qualify for immediate expensing for tax purposes up to a maximum of $1.5 million per year if the eligible assets are available for use before January 1, 2024.
Eligible assets available for immediate expensing would be capital property that is subject to the capital cost allowance (CCA) rules, other than property included in CCA classes 1 to 6, 14.1, 17, 47, 49 and 51, which are generally long-lived assets.
Using Your Personal Deductions
Remember your other registered accounts, such as registered retirement savings plan (RRSP) and tax free savings account (TFSA).
- If you have room in your RRSP, contributions must be made on or before March 1, 2023 to qualify for a deduction for your 2022 tax return.
- Contributions to a TFSA are not deductible for income tax purposes. However, any capital gains and/or income earned in a TFSA are generally tax-free, even when it is withdrawn.
If you are interested in learning more about any of these strategies or have any questions in regard to optimize your tax planning, contact us to book a meeting with our team.
Disclaimer: Any tax information published on this blog is based on the facts provided to us and on current tax law (including judicial and administrative interpretation) during the time of publication. This does not constitute legal advice. Tax law can change (at times on a retroactive basis) and these changes may result in additional taxes, interest, or penalties. Practice due diligence and if in doubt, speak with a member of our team.