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Year End Tax Tips: 2007

Written by FrugalTrader on Dec 24, 2007 filed under Tax Minimization

I was watching the tax segment on Rob TV last night and they highlighted some year end tax strategies to take advantage of.

Here is a short summary of the year end tax tips of 2007:

Tax Loss Selling. If you have taxable capital gains this year in your non-registered account, you may want to sell some of your losing stocks. Why? The realized losses will offset your gains, thus reducing your taxable amount. Capital losses can also be carried back against capital gains accrued in previous years. Make sure you do this by December 24th (today) though as it takes 3 days to settle your trade. Another note is that the markets close early on Christmas Eve, so trade accordingly.
Be patient in taking stock profits. If you want to take profits in a stock, wait until the new year. That way, you'll have a year of tax deferral.
Charitable Donations. You have until Dec 31 to make your charitable donations in order for it to count under the 2007 tax year. Also when you file your taxes next year, make sure you file all the donations under one person.
Donate Stock instead of Cash to Charities. It may be a bit late for this now because of processing time, but if you donate stock to a charity instead of cash you'll get tax bonuses. The tax regulations now state that stock donated to a charity will not face any capital gains taxes AND the contributor will receive a tax receipt for the amount donated. Check out my article on "Charitable Donation Tax Credit Strategies" for more information on how to maximize this tax rule.

Some thoughts to keep in mind to help optimize your tax return in the new year.

If you have more tax tips, please add them to the comments.

5 Comments, Comment or Ping

1. Canadian Dollars

re: Charitable Donations

This might be common sense, but in addition to filing all donations with one spouse, one should file all donations under the higher tax paying spouse to maximize the tax savings!

CD

Dec 24th, 2007 @ 10:37 am
2. FrugalTrader

Merry Christmas CD! It actually doesn’t matter which spouse you claim it under as it’s not dependent on the tax rate of the spouse. The first $200 of donated amount is given a refund equal to the lowest tax bracket in your province, and the rest is given back at a rate equal to the highest tax bracket.
See this article for more details: http://www.milliondollarjourney.com/how-the-charitable-donation-tax-credit-works.htm

Dec 24th, 2007 @ 11:34 am
3. Gates VP

Thanks FT for filling that one in. It’s much like the public transportation deduction credit. It all comes “off the bottom” so unless one spouse is pushing close to 10k it doesn’t really matter who takes the credit.

Of course, I really like the stock donation idea. However, I wonder if it results in the charity getting dinged instead? The government likes to get its cut, so is this a real loop-hole?

Dec 24th, 2007 @ 4:23 pm
4. Rodney Payne

The charity does not get dinged.

Also, with selling stocks to claim the capital loss, be wary of the superficial loss rules. They’re much too detailed to go into here, but if you are selling losers, I recommend that you be aware of those rules.

Dec 24th, 2007 @ 7:15 pm
5. FrugalTrader

For those of you interested in reading more about the superficial loss rule, you can get more info here:
http://www.milliondollarjourney.com/how-investing-taxes-work-part-1.htm

Dec 24th, 2007 @ 8:05 pm