From The Editor: No Time Like the Present

Q4 | December 2023

Laptop, notebook, Tablet and coffee on work desk

Topic: Wealth Planning

Brad Weber  CPA, CA, CFP, CIM

December 14, 2023

Image used with permission: iStock/PRImageFactory


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From The Editor: No Time Like the Present

Q4 | December 2023

I recently heard one of my favourite quotes about planning. It can come in various versions, but to paraphrase, ‘The best time to start planning was yesterday, the second best time to start planning is today.’ The gist is that you can never miss the opportunity to begin planning. However, there are times when a deadline comes along that you might want to take advantage of, which can be the case with taxes.

As there is still time before the end of 2023, I wanted to highlight a few things that are new this year to consider before 2024 starts.

As previously announced, the new First Home Savings Account (FHSA) is available at Nexus. Opening an FHSA account this year should be added to your list of priorities. Those eligible have $8,000 of contribution room this year and could receive another $8,000 of room starting January 1st. By opening an account this year, you can contribute $16,000 in a relatively short time frame. However, unused FHSA contribution room accumulates in a different manner than the RRSP or TFSA. If you wait until next year to open an FHSA, you’ll have $8,000 of contribution room, but you won’t generate the next $8,000 of contribution room until January of 2025. Therefore, there is some incentive to get the account opened now.

Many of our clients already own a home, so an FHSA account may not benefit you directly. But if you have children or grandchildren who qualify, this could be an opportunity to provide them with a gift or financial assistance by funding their FHSA account. You will need to have the account opened in the name of the child or grandchild, and they’ll be the ones to benefit from the tax deduction that is generated. But in terms of overall family wealth planning, the FHSA is a tool worth contemplating. As a reminder, to qualify, someone must be over 18, a Canadian resident, and considered a first-time home buyer.

Qualifying as a first-time home buyer doesn’t mean you’ve never owned a home. In fact, the definition is that you haven’t owned a home in the current calendar year or in the preceding four calendar years. This means that there could be other situations where someone might still qualify for an FHSA and the tax deduction benefits. You could even be older and now renting, but if you are under age 71, there could still be a planning opportunity. You don’t even need to plan to purchase a home, as the contributions can ultimately be transferred into your RRSP or RRIF account.

Another consideration for the remainder of the year is the changes to the Alternative Minimum Tax (AMT) rules that come into effect in 2024. An entire article could be written on this topic, and Dianne White has done just that. While you can read more about the AMT changes there, (Capital Gains, Charitable Acts, and the New Alternative Minimum Tax), a noteworthy area to highlight is how the new rule changes could affect the tax credit you receive on large donations. The changes to the AMT regulations are complicated. And there are no good rules of thumb to adequately outline what the impact could be. It’s best to evaluate your situation on a case-by-case basis. The new rules might not have the negative impact on many high-income earners as was feared, but people with more unusual circumstances, such as those selling a business, are more likely to be affected by these rule changes. The government is considering gathering feedback on the new AMT, but that doesn’t mean there will be changes. For now, it is safe to assume the new AMT rules will stand as is and will be effective Jan 1, 2024. If you are thinking about making a significant donation soon, give us a call to determine whether or not you might be best served making that donation this year.

Also, in this issue, Denys Calvin discusses the idea that while the current higher rates available on GICs might look attractive today, these instruments may not align with the objectives of a long-term portfolio strategy.

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