Year-End Tax Planning Insights for Investors

Interviewer:
Joining us now with some smart tax-plating strategies as we head into 2026 is Kim Inglis with Raymond J. It was Will Kim, great to have you back with us today. 

Kim Inglis:
Thanks for having me. 

Interviewer:
Of course, so as we head into the year end, what are some final opportunities for investors to save on taxes in 2025? 

Kim Inglis:
Yeah, so what I would suggest investors during as they comb through their portfolio, they take a look at their positions and see if they happen to have anything that's trading at a loss. If they do, they could consider realizing that position, selling it, realizing the capital loss, and then using that to offset some of the capital gains, they've very likely made this year. Couple things to keep in mind with that though. So if investors do that, they do need to be careful about superficial loss rules. So don't go and buy, sell the position, and then buy it right back. They need to wait 30 days, otherwise they won't be able to claim that loss. And then the other thing I would suggest is sometimes people, they really like their positions, they don't want to get rid of them, but they do need to realize the loss for tax purposes. So if they want to maintain exposure, what they could do is using Procter and Gamble as an example happens to be down quite a bit this year. If someone really likes that, they want to maintain exposure, they could sell the position, and then they could buy a consumer staples ETF as an example to maintain that exposure, and then after they're past the 30 days, then they could buy their stock back. So yeah, so that's what I would consider doing. Obviously it's been a year with a lot of gains, so people may not have a whole lot to choose from in terms of losses, but well worth taking a look anyway. 

Interviewer:
Yeah, like you said, many people are probably sitting on some sizable gains after the market run. How should they think about planning around those gains, Kim? 

Kim Inglis:
Yeah, so yeah, definitely lots of gains this year for investors, which was of course a good problem to have, but it does come with tax consequences, so you need to think through some strategy there. So if as an example say you are someone that thinks they'll be in a lower tax bracket next year, then they might want to consider deferring, selling their positions until next year, because of course they then don't have to deal with the taxes until the spring of the following year, so that can help from a cash flow perspective. If someone's a little more regular with their income and they figure they'll be the same in both years, but they could be considering is selling over a couple of tax years, so sell a little bit now and then sell a little bit next year, that can help smooth things out. And then the other thing I would recommend is that if you're working with an advisor, make sure they're working with your accountant, because they can coordinate and they can run through the numbers and see what amount of capital gains make sense to be realized, so that it's keeping you within a good tax bracket range. So I would definitely recommend that, but I will add one caveat to that is that, don't let the tax tail wag the dog, so to speak. Any kind of tax decision does need to also make investment sets. So again, why you want to work in conjunction. 

Interviewer:
And December is a month when many people think about giving back, Kim, what are the most tax efficient ways to support charities this time of year?

Kim Inglis:
Yeah, so if you've got appreciated stock, which many people do, of course, and you're philanthropically inclined, then what I would say is consider donating it to a charity instead of selling it and then using the proceeds to donate. And the reason I say that is because if you donate and instead, in kind, then you don't have to pay the capital gains on that, so that's obviously great. And then you'll also get a charitable tax receipt for the fair market value of that position. So also great. One thing I will say, though, is that if you're considering doing that, don't leave it to the 11th hour. Definitely do it earlier than later, because depending on the charity, especially some of the smaller charities, they might need a little bit of time to get that set up for you. The other thing that I will suggest is sometimes people want to make the donation, they need the tax receipt for this year, but they're not entirely sure what charity they want to donate to. What they could do is they could consider setting up a donor advised fund, so they can make the donation, get the tax receipt for this year if they do it before the end of the year, and then they can take some time to figure out who they want to grant that money out to. It might be one charity, it might be multiple, they can work with their donor advised fund provider to sort that out. So it gives them a little bit more flexibility with things. 

Interviewer:
And finally, Kim, are there any particular accounts investors should pay attention to at this time of year? 

Kim Inglis:
Yeah, so one of my favorite account types that I talk about a lot, not just now, but always really is a tax-free savings account. So TFSA's, I would argue that they're one of the most powerful planning tools that we have here in Canada, and unfortunately still, a lot of people are not fully utilizing them. And I think part of that reason is because when they first came out, it wasn't a very large contribution limit. So people figured it wasn't really worth their time or effort to set up. But now, if you've always been eligible to have a TFSA, and you've never had one, then the lifetime contribution limit as of this coming January will be $109,000. So that's a pretty significant amount of money. There's a couple of situations where I see for people. So sometimes people need to make withdrawals for their TFSA. So in terms of a tip for that would be, leave the withdrawal towards the end of the year, 'cause it gives you a bit more flexibility when you go to re-contribute. So if you need to make a withdrawal, you could do that now, then you could re-contribute as early as January. If you wait to January to do it, you have to wait till January 20, 27 to re-contribute. And then the other thing that I see kind of more frequently with these accounts is let's say someone has actually been able to maximize the TFSA and they want to continue that impact. Let's say they have an adult child that has contribution room. They could gift the funds to that child, then they could invest the funds and then you can continue the wonders of TFSA's through that means. 

Interviewer:
Well, great to have you with us as always Kim. Thank you. 

Kim Inglis:
Thanks for having me. 

Kim Inglis:
And thank you for watching. Once again, that was Kim Inglis with Raymond James and I'm your host Jenna Dagenhart with Asset TV.