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2012 tax moves to make now

Gail Johnson
The Canada Revenue Agency headquarters in Ottawa is shown on Friday, November 4, 2011. THE CANADIAN PRESS/Sean Kilpatrick

Tis the season to be jolly, but it's also the season for income-tax moves you'll want to make now, before New Year's, to save on your 2012 return.

"A lot of people don't think about their taxes now, but it's important to start in advance," says Cleo Hamel, senior tax analyst with H&R Block. "The filing deadline is not till the end of April, but this is a good time of year to be thinking about it because there a few things you can take advantage of before the end of the year."

Give to charity
If you're going to make a donation and want to claim it on your 2012 income taxes, you have to do so by the end of the year to get that tax receipt.

And here's an overlooked fact: The more you give, the more you'll save. "The more money you're able to able to claim, the more credit you're entitled to," Hamel explains. "The first $200 of donations earns you a 15-per cent tax credit. Every dollar over $200 gives you 29-per cent credit."

And if you can collect tax receipts for up to five years — so if you only give, say, $50 annually, instead of claiming that every year, consider holding on to the donations for a few years to get over that $200 mark and get a higher tax credit.

Squeeze in those medical appointments
Medical expenses can be claimed on your taxes, as long as your bills are paid up until the end of 2012. If you're going to have to have dental work or get glasses soon anyway, might as well take care of it — and pay for what's involved — by year's end so you can claim this on your 2012 taxes.

And if you have outstanding balances owing to your dentist, pay them off so you can claim the expense.

Remember to keep your prescription receipts, too. Even if you have a benefits plan that covers such costs, typically the plan only covers a certain percentage. The remaining amount -- what you pay out of pocket -- can be claimed.

"Many pharmacists now offer a year-end statement so you don't have to keep all those little receipts," Hamel says. "Those all add up, and you could be losing money if you don't have all the receipts for the year."

And if you pay for monthly health or dental premiums via payroll deductions at work, those qualify as a medical expense as well. More employers are noting this amount on your T4 summary, in box E5; if they don't, just ask your company for the annual amount you paid.

Consider tax-loss harvesting
Anyone who invests will want to look into this strategy, which, put simply, means selling securities at a loss to offset a capital-gains tax liability. If the value of stocks you've invested in has dropped, it may be wise to sell those now to offset the increase in another equity in your portfolio.

"Remember that trades take a couple of days to settle," Hamel notes. "We recommend doing any trades prior to December 23rd. If you wait till between Christmas and New Year's, you might be surprised when you get a transaction record for 2013."

Capital losses can be carried back three years or carried forward indefinitely.

Contribute to an RESP for your child or grandchild
According to the CIBC, the federal government provides a Canada Education Savings Grant of 20 per cent on the first $2,500 of annual RESP contributions per child, which can add up to $7,200 to an RESP during a child's lifetime. If you haven't maximized RESP contributions for your kids or grandkids, you can make an enhanced catch-up contribution in 2012.

If your child turned 15 in 2012 and has never been an RESP beneficiary, Dec. 31, 2012, is your last chance to contribute and be eligible for a CESG. By contributing $2,500 to an RESP, you could get $500 of free money from the government.

Pay off other expenses Daycare fees, costs for kids' fitness or arts classes, and interest on money borrowed for student loans or investment purposes can all be claimed— provided they're paid off by the end of the year. Here's an example: paying $500 for your son's winter-session swimming lessons before year end could mean up to $75 in reduced taxes.