What year-end tax planning questions should advisors expect?

Global financial services leader EY has released a report, titled Asking better year-end tax planning questions, to guide investors in working with their advisors to identify tax savings opportunities well before the April deadline for completed tax returns.

“As tax rules become more complex, it's even more critical to think of the bigger tax picture continuously throughout the year, as well as from year to year,” said Bruce Sprague, a tax partner with EY’s private clients services business. “No one likes year-end surprises. Having a conversation with your tax advisor about optimizing your tax savings can yield financial benefits into 2017 and beyond.”

Based on the report, EY suggests the following nine questions for clients to ask their advisors:

• Are there any income-splitting techniques available to me? – Clients could benefit from differences in tax brackets and marginal rates within the family via income-splitting loans, reasonable salaries to family members or spousal RRSPs.
• Have I paid my 2016 tax-deductible or tax-creditable expenses yet? – Certain expenses can only be claimed as tax deductions or credits if paid by calendar year-end, and others may be worth availing the following year.
• Have I considered the impact of any changes to personal tax rules that are effective for the year? – Due to changes decreed by the federal government, clients who sold principal residences during 2016 or hold linked notes maturing after 2016 may experience a tax impact.
• Have I maximized my education savings by contributing to an RESP for my child or grandchild? - An annual contribution of $2,500 per child under 18 will warrant a CESG of $500 annually.
• Is there a way to reduce or eliminate my non-deductible interest? – Since interest on personal debt is not tax-deductible, it’s worth paying them off before investment or business loans.
• Have I reviewed my investment portfolio?- Accrued losses may be used against realized gains, and realized losses may be carried forward.
• Can I improve the cash flow impact of my income taxes? – Some clients may be eligible for reduced source deductions or required to make a Dec. 15 installment payment.
• Have I thought about my estate planning? – The year-end is an ideal time to consider updates to a will, changes in life insurance needs, or an estate freeze to minimize tax on death or probate fees.

“Reviewing estate planning goals and wills on a regular basis… can protect your assets and provide tax-efficient income before and after your retirement, as well as a tax-efficient transfer of your wealth to the next generation,” Sprague said.


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