As the final weeks of 2008 draw to a close, most of us are focused on Christmas shopping, holiday parties and New Year's festivities. However, this is also the time to implement any final tax strategies that could help put more tax dollars back in your pocket. Here is a laundry list of strategies that may go a long way to helping reduce your taxes for 2008.

Trigger accrued losses before year-end

Capital losses are used to offset capital gains in the current year first, then any excess can be applied against capital gains in any of the three prior calendar years. If you have paid tax on capital gains this year or in the previous three years and have losing investments, consider triggering the capital loss before year-end. It is preferable to carry back losses to the earliest year possible since the oldest years will expire first. This strategy will help you recover taxes paid on the previously reported capital gains.

Donate securities to charity

A donation to a registered charity by year-end provides valuable tax credits. If you are planning to make a donation to charity, consider directly donating publicly traded securities or mutual funds that have appreciated in value, instead of cash. You will receive a donation receipt equal to the value of the investment at the time of the donation and any resulting capital gain is exempt from tax.

Make the most of your unused RRSP contribution room

If you have contributed less than the maximum permitted in prior years to your RRSP, you should have unused RRSP contribution room carried forward to 2008. Consider topping up your RRSP to the maximum possible in order to take advantage of the benefits RRSPs have to offer. If you're short on cash to maximize your RRSP room, consider borrowing to make your RRSP contribution or transferring mutual funds or securities in-kind to your RRSP. Speak to your financial advisor about ways you can maximize your RRSP contribution room.

Base withdrawals on age of younger spouse or common law partner

If you will be 71 by the end of 2008, you must convert your RRSP to a RRIF and begin drawing an income from your RRIF. Consider basing the minimum RRIF withdrawal on the age of the younger spouse. This will keep your required annual RRIF income as low as possible each year and allow you to keep more in your RRIF, thus deferring tax longer.

Make an advanced RRSP contribution

If you are 71 by the end of this year and have earned income in 2008, consider making an RRSP over contribution in December 2008. Earned income in 2008 creates RRSP contribution room for 2009. However, you will not be permitted to contribute to an RRSP in 2009, since you are required to convert your RRSP to a RRIF before year-end. This strategy does mean that you will be over-contributed for one month and hence subject to a 1% per month penalty tax. However, you will also be entitled to an RRSP deduction in 2009 that will provide tax savings that will far outweigh the penalty tax cost. Speak to your financial advisor about the specifics in your situation.

Apply for government benefits (OAS & CPP)

If you have reached age 60 in 2008, consider applying for your CPP retirement pension benefit. When you apply for CPP before the age of 65, your pension will begin the month after you stop working or when you earn less than the allowable maximum pension payment ($884.58 in 2008) for two consecutive months.

If you have reached age 65 in 2008, you should also apply for Old Age Security (OAS) benefits as soon as possible. Do not delay your application after turning 65, since retroactive payments are only available for up to 11 months plus the month in which you apply for OAS.

Create eligible pension income

New rules have been introduced to allow for spouses & common law partners (CLP) to allocate up to 50% of pension income that qualifies for the existing pension income tax credit to their spouse / CLP, as a means of income splitting. If you are over 65 in 2009 and have no other eligible pension income, consider drawing on your RRIF in order to take advantage of the income splitting opportunity presented with these new rules. Additionally, if your spouse/CLP is over the age of 65 as well, you and your spouse will qualify for the pension income tax credit. Therefore, in addition to the tax savings from income splitting, you will receive tax savings from the pension income tax credit – a double benefit ! Speak to your financial advisor about applying this strategy to your specific situation.

Take advantage of the new tax credits

A variety of new non-refundable tax credits have been introduced recently, including the Child Fitness Tax Credit and the Public Transit Tax Credit. The Child Fitness Tax Credit is available to parents of children under the age of 16 who are registered in an eligible program of physical activity, to a limit of $500 per child. The Public Transit Tax Credit is a credit for the cost of buying a monthly (or longer duration) pass for commuting on buses, streetcars, subways commuter trains and local ferries. Unlike other non-refundable tax credits, you will need to provide original copies of receipts to claim either of these tax credits, therefore be sure to obtain all receipts for eligible expenses in 2008.

2008 is quickly coming to an end. Therefore, if you wish to consider any of these strategies for yourself, contact your financial advisor immediately who can assist you in

implementing any strategies that benefit you.

This article was prepared by Joyce Owen who is a Financial Advisor/ with Dundee Private Investors Inc, a DundeeWealth Inc. Company. This is not an official publication of Dundee Private Investors Inc. and the author is not a Dundee Securities analyst*. The views (including any recommendations) expressed in this article are those of the author alone, and they have not been approved by, and are not necessarily those of Dundee Private Investors Inc.

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