Chartered Accountants of Ontario, Canada

 

2006 YEAR-END TAX PLANNING CHECKLIST

Parents and Spouses

The following checklist provides tactics you should consider as part of your year-end tax planning. If you need further explanation, please contact Chaplin & Co., Chartered Accountants at 416 667 7060.

  • Income splitting
    • If you have excess cash to invest and a lower-tax bracket spouse or children, consider an income-splitting plan.
    • Deposit child tax benefits payments into a bank account in the name of your child so that income earned thereon is taxed in the child’s hands.
  • Registered Education Savings Plan (RESP) - Contribute to an RESP for your child. You are allowed to contribute up to $4,000 each year for each college or university student. You are not able to carry-forward unused contributions.
  • Consider giving investments to a child - Consider transferring investments to a child where that investment has dropped in value. This will trigger a capital loss that parent can use and any future growth will be taxed in the child’s name. Capital gains are not attributed to the parent.
  • Personal residence - For each personal residence owned by our family that was acquired before 1982, consider
    • the need to establish the value of the residence at December 31, 1981; and
    • the need for separate rather than joint ownership.
    • where more than one residence is owned by a family, the personal residence designation should generally be used for the property with the largest gain per year. However, the timing of the tax liability must also be considered.
  • Childcare expenses -
    • Pay childcare expenses for 2006 before December 31,2006 and get a receipt.
    • Boarding school and camp fees qualify for the child care deduction (subject to certain limits) as does the cost to advertise or use a placement agency to find a child care provider.
  • Employment leave by spouse - If your spouse is leaving the workforce, time contributions and withdrawals from a spousal RRSP to provide your family with extra disposable income.
  • Contribute to a spousal RRSP - Review each spouse’s RRSP and make RRSP contributions designed to equalize RRSPs so that each spouse will have the same retirement income
  • Separation agreements -
    • Review terms to ensure that you will be entitled to the maximum deduction or the minimum income inclusion.
    • Segregate child support component from alimony. Otherwise, the entire amount will be considered child support and will not be deductible.
  • Alimony payments - Ensure that all alimony or maintenance payments for the year are made by December 31.
  • RRSPs
    • Contribute by deadline of first 60 days of year to be able to claim deduction in previous tax year.
    • To maximize your 2007 RRSP contribution of $19,000, your earned income must be at least $105,556 in 2006.[2006 - RRSP limit is $18,000 and earned income should be $100,000]
  • Children abroad - Consider whether your will and estate plan need to be updated for children who no longer reside in Canada.
  • Children under 6 - Ensure that you made the claim for the Universal Child Care Benefit of $100 per month, which started on July 1, 2006.
  • Children’s Fitness Tax Credit - A non-refundable credit based on up to $500 of eligible fees for physical-activity-programmes is to commence on January 1, 2007
  • Child Tax Benefit - Ensure claims are made for the child disability benefit if eligible; the benefit increased from $2,044 to $2,300 on July 1, 2006.