Giving. If it doesn't hurt a little, it probably doesn't help a lot.
I had to wait a few years before my passion for hockey was rewarded with registration in the local minor-league. There just wasn't that kind of money around. Equipment was always second hand, picked up from a lower shelf in the corner of a sporting goods store or handed down from another family. But registration money can't be bought at the Sally Anne. Somebody came up with it.
None of this felt like a hardship at the time. Quite the contrary, it was all we knew, and somehow we managed to mock those poor schmucks who wore all the shiny new stuff.
Years later, after I finished university and finally started playing adult recreational hockey, it was with a smirk on my face that I put on my motley gear, unused over the past several years, and stepped onto the ice against my well-equipped adversaries.
Lacing up an old pair of tube skates, some mismatched hockey pants and socks, and a stinky old pair of gloves I expected to skate circles around those who had the mixed blessing of plenty.
But a dozen years pounding the books and sitting behind a desk is something that even unbounded arrogance couldn't lift off the ice. There was nothing breezy about my stride anymore - wheezy yes, but not breezy. I quickly changed my goal from dominating to surviving.
None of my rich childhood sports memories could have been possible without the kindness of generous coaches, mentors, and other benefactors who made my modest sports career feel like something glorious in my small mind.
In our ongoing series on year-end tax planning, we begin this week by touching on charitable donations.
Charitable donations
Making a charitable donation is one of the ways that you can significantly reduce the personal tax you pay. The final day to make contributions to a registered charity in order to claim the donation tax receipt on your 2015 income tax return is Dec.31, 2015. Due to the calculation of the donation tax credit, donations above $200 can result in a tax savings equal to the top marginal tax rate.
As an alternative to cash, you can also donate publicly listed securities in-kind to qualified charities without being subject to tax on the realized capital gain. You will receive a donation tax receipt equal to the fair market value of the security at the time of the donation, which can help reduce your total taxes payable.
If you plan on donating securities in-kind before year-end, then due to the administration involved in processing an in-kind donation, ensure that you start this process well in advance of the year-end to ensure that the in-kind donation is recorded as a 2015 donation.
If you have thought about leaving a legacy but are unsure of the best way to accomplish this, there is at least one firm (ours - but presumably others as well) which has a structure whereby you can set up your own charitable foundation.
Other year-end considerations
Rrsp contributions
You have until Feb. 29, 2016 to make a contribution to your
RRSP, or a spousal RRSP, and deduct the amount on your 2015 tax return. However, the sooner, the better.
RRSP contributions if you are turning 71 in 2015
If you are turning age 71 in 2015, you must convert your RRSP, Locked-in Retirement
Account (LIRA) or Locked-in
RRSP to one of the maturity options that are available by Dec. 31, 2015.
Keep in mind that you DO NOT have the extra 60 days after 2015 to make your RRSP contribution if you are already 71.
Contributions are not permitted to a RRIF. Likewise, if you are turning age 71 and have earned income in 2015, consider making your 2016 RRSP contribution before your RRSP is converted to a RRIF.
You will have to make this contribution by Dec. 31 because the new contribution room based on your 2015 earned income will not be created until Jan. 1, 2016
at which point your RRSP will have already been converted to a RRIF.
This early contribution (sometimes called the "forgotten RRSP contribution") will allow you to claim the RRSP deduction on your 2016 income tax return.
If you have already made the maximum contribution for the current year, the CRA will consider your early contribution to be an excess contribution that is subject to the over-contribution penalty of one per cent of the excess amount per month.
On Jan. 1 the early RRSP contribution you made will no longer be considered an over-contribution because your new contribution room will be realized based on your earned income from this year.
It is likely that the tax savings realized by deducting the contribution on your tax return will
far outweigh the one-month penalty.
If you have a younger spouse, you can also consider making your RRSP contributions to a spousal RRSP until the year your spouse turns age 71, thereby avoiding the over-contribution penalty.
This article is not meant as personalized tax or legal advice. Readers must consult their own tax professionals before proceeding with anything they read here.
Mark Ryan is an advisor in Prince George with RBC Wealth management, Dominion Securities, (member CIPF) and can be reached at [email protected].
