Financial Tips for Santa

Santa’s on a tight schedule, he only has a few days left to make sure all the presents are wrapped, packed and his reindeer are ready to fly.

The end of the year is also a crucial time for last minute financial planning, even for Santa.  Jolly old St. Nick is not only a Canadian; he is a prominent philanthropist, business owner, senior citizen, and extensive traveler.  Like all Canadians he needs to take into account several taxation and financial planning considerations before the end of the year.

Here are a few tips

Charitable donations.  Santa is one of the world’s most prominent philanthropists.  Fortunately for him, most of his donations will be made by the December 31^st deadline so that credit can be made on his 2012 tax return.

Income Splitting.  This is an important consideration as Mrs. Claus is not employed (as far as we know).  Santa might want to consider income splitting with her to minimize his annual tax liability by using a prescribed rate loan to Mrs. Claus.  Depending on the amount of the loan, the amount of tax paid by Santa could be substantially reduced.  (Current interest rate is one percent for such loans).

Avoid the OAS Clawback.  Once Santa’s 2012 income reaches $63,511 his OAS will start to be clawed back.

Santa does extensive travelling.  Because of this, he will need out-of-country travel insurance and may also consider out-of-country medical insurance for his Christmas Eve flight, just in case.

If Santa has made investments, the last trading day to ensure losses can be used to offset gains from this year is December 24^th for Canadian transactions and December 26^th for U.S. transactions.

Is Santa getting ready to RIFF?  If Santa turns 71 in 2013, he will need to start drawing down his RRSP.  The minimum withdrawal amount will be 7.31% of the value of his account on January 1^st.

Santa is an (incorporated) business owner with an eternity of active years ahead of him.  As such, he should consider opening an Individual Pension Plan (IPP).  An IPP is structured to provide tax relief for the corporation and enhanced retirement savings (beyond the RRSP).

Santa will want to take some time off and relax after December 25^th.  As a Snowbird heading south for the winter, he must remember if he stays in the U.S. for more than 183 days in two consecutive years, he may be liable to pay U.S. income tax.

So much to do; so little time.   Let’s hope Santa has hired a Certified Financial Planner to help guide him through the nuances of Canada Revenue Agency’s Income tax act.

Wishing you all a Wonderful Christmas; filled with family and friends.

Tracey

Source:  Original article written by Staff at advisor.ca