Last Updated on December 8, 2024 by Finance Faded
As the year comes to a close, it brings with it the season of reflection and planning. For some, this time is marked by the joy of buying gifts for loved ones and exchanging best wishes for the upcoming year. For others, it’s a moment of introspection—reviewing achievements, identifying challenges, and setting goals for improvement.
Whatever your situation, take a moment to appreciate how far you’ve come. To those reading this from a hospital bed or enduring difficult times, I empathize with your struggles. May the new year bring you good health, blessings, and brighter days.
In this article, I highlight six essential actions to consider before year-end. These steps can help you optimize your finances, reduce taxes, and start the new year on a strong financial footing.
1. Contribute to a Registered Education Savings Plan
If you have children with a Registered Education Savings Plan (RESP), ensure you contribute up to $2,500 by December 31. Doing so allows you to maximize federal government grants, and for Quebec residents, additional provincial grants.
For more details, read our comprehensive guide: RESP From A to Z: A Comprehensive Guide for Parents.
2. Review and Update Your Will
In many cultures, discussing estate planning is considered taboo, but it remains a critical aspect of financial preparedness. If you already have a will, consider updating it every three years to reflect changes in your financial situation or family dynamics.
Learn more about will preparation in our article: Set Up Your Will: The “Four Ts” Rule.
3. Maximize Your First Home Savings Account
If you are eligible for the First Home Savings Account (FHSA), take advantage of its benefits by contributing up to $8,000 annually. Unused contribution room from the previous year can be carried forward, allowing a maximum contribution of $16,000 in one year. Contributions are tax-deductible, offering significant tax savings.
Explore this topic further in our guide: FHSA From A to Z: A Complete Guide for First-Time Home Buyers.
4. Claim the Refundable Medical Expense Supplement
Gather your medical receipts for the year before December 31. Qualifying medical expenses may be eligible for the Medical Expense Tax Credit, which provides tax relief for significant medical or disability-related expenses incurred for yourself, a spouse, common-law partner, or a dependent relative. The credit is calculated based on expenses exceeding the lesser of 3% of net income or $2,759 (for 2024).
Read more about this tax benefit: Refundable Medical Expense Supplement.
5. Strategically Manage Withdrawals from Your Tax-Free Savings Account
If you’re planning to withdraw funds from your TFSA early in 2025, consider making the withdrawal before the end of 2024. By doing so, your contribution room will be restored in 2025, allowing you to reinvest sooner and maximize your tax-free growth opportunities.
6. Optimize Withdrawals from Your Registered Retirement Savings Plan
For those intending to withdraw funds from their RRSP under the Home Buyers’ Plan (HBP) or Lifelong Learning Plan (LLP), consider delaying the withdrawal until January. This strategy pushes the repayment start date forward by one year. Given the substantial sums involved—the HBP now allows withdrawals of up to $60,000—this approach can have a significant financial impact.
Conclusion
As you wrap up the year, these six financial strategies can set you on a path to greater financial security and success in the year ahead. Taking the time to plan and act now will not only reduce your tax burden but also help you manage your finances more effectively. Here’s to a prosperous and financially savvy new year!
Very good summary to end the year! Thank you very much for taking the time to remind us of what is important to do. All our blessings to you, and we look forward to the new year’s articles!
Thank you, Esso, for your kind words and blessings! Stay tuned for more insightful content in the new year!