Capital Gains, Losses, and Other Tax Planning Concerns

Capital Gains Exemption Deduction

The lifetime capital gains exemption deduction, if you dispose of shares in a qualified small business corporation, is $835,716, or $1,000,000 for a qualified farm property or qualified fishing property. If you have already claimed the $100,000 personal capital gain exemption (ended in 1994) then this reduces the available lifetime capital gains exemption. You must also verify whether you have claimed allowable business investment losses (ABIL) in prior years or have cumulative net investment losses (CNIL) as of December 31, 2017, as these items will also affect the amount of exemption that can be claimed.

Use Capital Losses

You can use your 2017 capital losses to reduce your current year’s income taxes by applying such losses against your 2017 capital gains. You must, however, be careful of the superficial loss rules preventing you from claiming a capital loss on an identical asset that you reacquired 30 days before or after the sale date. If capital gains were realized in the years 2014 to 2016 and net capital losses were incurred in 2017, then you can carry these losses back against previous years’ capital gains. You can carry the unused 2017 losses forward to future capital gains. The last 2017 transaction date effective for publicly traded securities is December 22, 2017.

Other Tax Planning Concerns

If you have questions about any of the following issues we can help get you on the right path!

  • Consider a Registered Education Savings Plan (RESP) for your children.
  • Set up a Tax Free Savings Account (TFSA).
  • Review your December income tax installment.
  • Make a low interest loan to your spouse.
  • Repay outstanding shareholder loans and pay interest on employee loans.
  • Contribute to your spouse’s or common-law partner’s RRSP to the extent of your RRSP deduction limit for 2017. This doubles the amount a couple can withdraw for the Home Buyer’s Plan.
  • Consider a Registered Disability Savings Plan for a child with a sever disability.
  • Claim your personal tax credits.
  • Keep your transit passes (up to June 30, 2017).
  • Pay reasonable salaries to family members in 2017.
  • Convert non-deductible debt to deductible interest.
  • Review your will every five years.
  • Split pension income with spouse.
  • Home buyer’s tax credit for first time home buyer.

Consult your local Padgett office to discuss your tax planning concerns and implementing future tax strategies. 250-744-3854