For most people, tax planning is at the bottom of their to-do list.  While we all complain about paying income taxes, we should also put in the effort to reduce our income taxes payable come tax filing next year.

Right now, things are quiet and you can go through things without a panic.  When we’re in tax season, we become stressed and tend to overlook things which can cost us money.

Here are some year-end tax planning tips:

1. Add up your taxable income from all sources. Include employment income, investments, RRSPs, etc… There may be ways to reduce your income tax bill but you will be limited after December 31.
2. Get organized. If you haven’t already, start an envelope or folder to hold all your tax slips and receipts.
3. TFSA withdrawals. If you plan on making a withdrawal from your tax free savings account, you should do so prior to December 31. You will then have the opportunity to recontribute as of January 1.
4. Pool medical expenses. Medical expenses can be claimed in any 12 month period and the family’s expenses should be pooled together on to one tax return.
5. Review your stock portfolio. It can be a wise decision to sell some stocks to lock in a capital loss or gain. Capital losses can be carried back three years or carried forward indefinitely.
6. Don’t forget your renovations. You may have some receipts from early 2010 that are eligible for the home renovation tax credit (HRTC). The HRTC was available to be claimed only in 2009, so if you have receipts, you need to file an adjustment to your 2009 income tax return.
7. Plan your moving day. Check the provincial income tax rates before in the province before you move. You are subject to provincial tax based on where you reside on December 31. So if there is a substantial difference in tax rates, you may want to speed up your move or defer it until the next year. For example, if you plan on moving from Toronto to Montreal, you should wait until after January 1 to avoid an extra tax bill.
8. Purchase new computer equipment. If you are in business, you have until February 2011 to take advantage of the 100% capital cost allowance on your income tax return.
9. Make an RESP contribution. To take advantage of the government’s Canada Education Savings Grant for 2010, you must make a contribution to your child’s RESP before December 31.