7 Tax Resolutions for the New Year

1. Maximize your RSP contributions:
   Retirement Savings Plans (RSPs) continue to be one of the best savings vehicles available. Besides upfront tax savings, RSPs let your investments grow on a tax-deferred basis. A contribution early in the year helps take advantage of this.
2. Make RESP contributions:
   Contribute early to a Registered Education Savings Plan (RESP) to maximize the tax-deferral benefits and allow you to invest the additional amounts received in the form of a Canada Education Savings Grant (CESG). The federal government increased the maximum annual CESG that can be received from $400 to $500 (and from a maximum of $800 to $1,000 per year if any unused grants are carried forward). In addition, the annual $4,000 RESP contribution limit per beneficiary no longer applies although the $50,000 lifetime contribution limit per beneficiary remains in effect.
3. Split your pension income:
   As you prepare your 2007 tax return, you may elect to allocate up to 50% of your eligible pension income to your lower-income spouse or common-law partner for income tax purposes. You can do this by completing Canada Revenue Agency (CRA) form T1032, Joint Election to Split Pension Income, together with your spouse or common-law partner. Eligible pension income includes annuity payments received from an employer pension plan and, if you are age 65 or older, payments from your Retirement Income Fund (RIF).
4. Contribute to a spousal RSP:
   In light of new rules allowing spouses to split pension income, some may wonder if it still makes sense to contribute to a spousal RSP. In many cases, the answer is still yes. Income from a spousal RSP (or its successor RIF) can be fully taxed in the hands of the lower-income spouse or common-law partner, as opposed to only half of the qualified pension income that can be split with a lower-income partner. In addition, spousal RSPs permit income splitting to take place before age 65.
5. Reduce taxes at source:
   If you regularly contribute to an RSP, make alimony payments, incur significant interest expense, or have child care expenses, you may be able to have less tax withheld at source by your employer by completing CRA form T1213.
6. Keep your public transit receipts:
   In 2007, a federal tax credit for the cost of buying a monthly (or longer duration) pass for buses, streetcars, subways, commuter trains, and local ferries was expanded to include weekly passes and cost-per-trip electronic cards in certain situations. Keep your expired passes and receipts issued by your local transit authority.
7. Revisit your portfolio and financial plan:
   The New Year can be an opportune time to align your portfolio with your tax planning goals. It might be a good opportunity to rebalance your portfolio as well as ensure that you are on track for 2008 and beyond.