The end of the year is approaching, and therefore the deadline to contribute to your tax-free savings account for the purchase of a first property (CELIAPP) too. To help you not forget anything, here are some important things to keep in mind.
Until the end of December
Recently launched by the federal government, CELIAPP is the tax novelty of the year for aspiring owners. As its name suggests, it is a savings account intended for the purchase of a first home.
Just like those intended for a registered retirement savings plan (RRSP), annual contributions to a CELIAPP are tax deductible. This means that the money you deposit into these accounts is subtracted from your taxable income. This therefore drops, and you are taxed less.
However, be careful, “the contribution period is not the same for these two plans,” underlines Gino Gosselin, tax partner at Raymond Chabot Grant Thornton.
You can still put money in an RRSP during the 60 days following the end of the year. But in the case of CELIAPP, you only have until the end of the year to do so; Contributions made after this date must be included in your tax return for the following year.
“Eligible people can contribute up to $8,000 per year to their CELIAPP and the maximum cumulative limit is $40,000,” recalls Mr. Gosselin. Please note, if you do not contribute up to the maximum allowed, the unused portion is added to your rights for the following year. This applies from the year of opening of CELIAPP.
Other tax reminders
However, the CELIAPP contribution period is not the only thing to take into account between now and the end of the year, indicates Gino Gosselin. If you have made capital gains this year, “a review of your portfolio before the end of the year could help you minimize your taxes if you declare a capital loss,” mentions the tax specialist.
As a reminder, when you make a profit by selling an investment — outside of a vehicle like the TFSA, CELIAPP or RRSP — this profit is considered a capital gain and is subject to tax. The latter is then calculated by adding 50% of this gain to your taxable income. And if you instead have a capital loss, 50% of this loss can be deducted from your taxable income.
Furthermore, “high-income individuals must also prepare for significant changes regarding the replacement minimum tax (IMR) in 2024,” underlines Mr. Gosselin. This is a parallel calculation to ordinary tax, which grants fewer deductions, exemptions and tax credits than ordinary rules for high-income taxpayers. Starting next year, the AMT rate will be increased from 15% to 20.5%, and the basic exemption will increase from $40,000 to approximately $173,000.
For more information, Raymond Chabot Grant Thornton offers a complete tax planning guide online for businesses and individuals.