Well .. you might be sitting in your rocking chair wondering if it’s still possible to reduce some of your income tax that you will owe for 2008 .. and then look at the calendar and realize that it’s December 31, 2008 now – and time is running out!!
* Deferral of My Paycheque
If I were an employee receiving a paycheck on the 15th and the end of the month, I might consider asking my employers to withhold my cheque until 2009. Amounts paid in 2008 are taxable in the year received. Of course, in the scheme of things 2009 will have one extra paycheque included in your earnings.
* Payment of Employment Related Expenses
If I were part of a union, I might pay my union dues or any other work related dues that you normally deduct on your tax return – for the following year in advance. Receipts issued are based upon payments they receive in a calendar year.
* Stock Losses etc
Unfortunately, there is nothing that can be done today to help me reduce my taxable income, as dispositions of capital property must be realized in the accounts, and I believe in 2008 December 22 was the magical date you needed to clear the transactions .. Dang you weekends of 2008!!
* Investment Expenditures
I do have investment income, and as such .. investment related expenses are deductible if paid in the calendar year. These type of expenses could be interest on investment loans, investment couseling fees, safety deposit box rentals, and yes .. your accounting fees.
* Minor Maintenance
If I owned properties, I might incur expenses to remove the snow, or for the performance of minor repairs and handyman work around the property.
* Major Maintenance
If I owned properties, I might decide to upgrade my electrical or plumbing and / or even purchase major appliances that may be supplied in rental properties. Unless these are replacements of existing assets (like non-working stoves etc) generally these improvements and assets are capitalized and only a portion of the capital cost allowance (depreciation for income tax) would be recorded. One half normal rates are taken, but if you were planning to purchase assets in the next few weeks anyway .. you get a bigger bang for your bucks by purchasing the asset today. You might want to note that you should not only pay for the items today, also take possession today.
Generally, it doesn’t matter when you receive your income .. if it is earned in 2008 you should accrue the earnings in 2008, not when received. However, the good news is that you are also able to accrue expenses used to generate that income. So, even though you don’t actually pay for expenses today – as long as you engage the service, receive the products or purchases today, or incur costs that help promote or sell products or used to collect monies from receivables .. they can be deducted.
* Last Minute Expenses
I always buy my liquor for gifts and to have around for promotion in my work-at-home space around Christmas time, so I am covered already but *cough,cough* if I didn’t do that by now, I could probably run out December 31st and get my gifts covered. Because I do a lot of personal income tax returns and such, last week I stopped over at my local Office Depot and loaded me up on copy paper, Post-It notes and staples etc, even though I probably won’t need to use them until mid-January or so.
* Asset Acquisitions
Pretty much same reasoning with both the above deferral paragraph – and the rental major maintenance paragraph above. If you are purchasing a vehicle, that may be financed (and not paid today) .. be sure to take possession of any major asset purchase today, December 31, 2008. Do you need any new office furniture? Office chairs? Bookshelves?
* Bonuses to Employees
If you are going to give your staff or employees a bonus anyway, and didn’t during the Holidays and now feel like a scrooge .. PAY your employees today to claim the deduction. For those considering ‘bonus’ payments to spouses, children and/or relatives .. I would suggest you cough up the money, and pay it. Do not redeposit into a shared bank account, or presume it doesn’t matter because you have a joint bank account.
* Business Use of Home Office
If you are self employed – and claiming a portion of your house expenses against your proprietorship business income, pay your Utility bills today (heat, lights, and water) at least to include the payments in this year’s calculations
* And speaking of being Self-Employed …
Every December 31st I go to my local SuperLube and get an oil change .. just so I can get a factual documentation of the mileage reading on my car at the end of the year. This way, when I calculate personal vs business miles – it is quite easy because I know exactly how many kilometers I have driven during the year.
MEDICAL AND DONATIONS
* Medical Expenses
If I would have thought about taking an eye test recently, I probably would have purchased new glasses if ended up needing a new prescription and be sure I paid for them before the end of the year. I’ve recommended to a few clients who are paying monthly payments for their child’s orthodontist billing that if they can afford to pay off the dental bill .. do so before December 31st.
Also – you can deduct medical expenses for any 12 month period ending in the year, so you would have to double check your 2007 unclaimed medical expenses and see if it pays to claim a different period this year other than a calendar year.
* Charitable Donations
December 31 is the last official day that you can donate to a registered charity and receive an official charitable donation receipt for 2008. Receipts are either mailed before the end of February 2009 or can often be downloaded straight off of the internet now.
One Of The Best Ways To Figure Out What You Can Deduct
… is to look at your last year’s return. Don’t take advice from someone like me or other information that you find on the internet. Look at your last year’s tax return, ask your own accountant or tax preparer questions, and even check out CRA’s website http://cra.gc.ca or just do a google search!
The new 2009 tax forms come online January 6th 2009 and I know myself, I probably won’t be upgrading my software until the end of February or first week of March 2009 (I concentrate on T4’s T5’s etc first) … but, here’s a screen image of the 2007 income tax returns.