Make sure you have made at least $2,500 in registered education savings plan contributions per child during 2007, since that is the new amount that entitles you to receive the 20-per-cent Canada Education Savings Grant on, up from $2,000 in previous years. The $4,000 yearly RESP contribution limit has been eliminated, and the lifetime limit has been increased from $42,000 to $50,000 per child.
Avoid purchasing mutual funds in non-registered accounts late in the year because you will be taxed on year-end distributions that include gains received by investors before you bought your units. Remember when you go to file your tax return that you must pay capital gains tax not only on the amounts recorded on T3 or T5 slips as part of distributions, but also on capital gains realized from your personal sale of funds in non-registered accounts during the year. Also, postpone making non-registered investments until the New Year if possible.
Delay selling profitable stocks or mutual funds held outside registered retirement savings plans until the New Year, to defer paying capital gains tax until 2008. Conversely, consider selling stocks or mutual funds in non-registered accounts that have gone down in value on or before Dec. 24. That will trigger capital losses, which must first be used to offset capital gains realized in 2007, and excess losses can be carried back against capital gains during the previous three years, or carried forward indefinitely against future capital gains.
If you have stocks that have increased in value, consider donating them to a charity before year's end. Under new rules, by doing so you will not have to pay tax on the capital gains, and you will receive a donation receipt for the full amount of the value of the securities. In addition, Alberta increased its charitable donation credit during 2007.
If you have turned or will turn 71 this year, you must convert your RRSP into a registered retirement income fund or a life annuity by Dec. 31. That's a change from the previous age limit of 69. However, you may make a final tax-deductible contribution to your RRSP before conversion. And you can make a contribution to a spousal RRSP until the end of February 2008 if the spouse is younger than 71.
Contrary to some public opinion, Albertans do not have to convert their locked-in retirement account (LIRA) to a life income fund (LIF) by the end of 2007 or forever lose the option of unlocking up to 50 per cent of their account. That deadline applies only to people who already had an existing locked-in income stream, either a LIF or locked-in retirement income fund (LRIF) before Nov. 1, 2006. People with existing LIRAs may unlock up to 50 per cent whenever they convert to a LIF, even if that happens after Dec. 31.
A sole proprietor or member of a partnership should make purchases of equipment or supplies before year end. The same holds for appliances or furniture needed for a rental property. The cost of major capital items may then start being depreciated in 2007, although only at half the yearly depreciation rate during the year of purchase.
A number of investment expenses are deductible and should be paid by Dec. 31. These include interest on loans to invest in a business or an income-producing investment outside an RRSP, plus investment counsel fees, the cost of renting a safety deposit box, and accounting fees to calculate rental or investment income.
Pay professional or union dues, alimony or maintenance payments (depending on your agreement date), and 2007 moving expenses, by year end.
Keep and file any 2007 receipts that might be arriving with Christmas mail, such as from sports programs that qualify for the child fitness tax credit, and also round up public transit receipts for passes of at least one week in duration.
If you are considering any major purchases that are not tax-deductible, remember that the goods and services tax will be reduced from six to five per cent on Jan. 1.
If you will have excess tax deductions or non-refundable tax credits in 2008, fill out form T1213 early in the year to have withholding taxes reduced on your regular paycheques. This will allow you to keep more money in your pocket during the year, instead of waiting to get it back as a tax refund in early 2009.