Five vital year-end tax strategies for sophisticated investors

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Five vital year-end tax strategies for sophisticated investors GlobeInvestor

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TFSAs are a good place to hold highly-taxed sources of investment income. That’s something to consider when rebalancing various accounts at year-end.Stealthy year-end tax planning is a critical task for investors and their financial professionals alike. The strategies employed now will determine how much money remains in Canadians’ pockets and how much goes to the Canada Revenue Agency , over the long run.

There are various other year-end considerations when it comes to TFSAs. First is the recontribution limitation; that is, withdrawals made from a TFSA in the current year cannot be added back into contribution room until the beginning of the following year. Investors should also know that earning business profits within a TFSA – including through day trading –throws it offside. Again, the penalties and potential interest costs are significant.

It’s possible to continue to deduct interest on an investment loan even after an investment is sold provided a new investment is acquired. It’s also possible to carry forward net capital losses to offset capital gains an investor plans to generate in future years. Even if no further capital gains are earned during a taxpayer’s lifetime, unused capital losses are very valuable on the final return, when the goal is to enable the most tax effective wealth transfer to survivors.

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