This is the third in our series of year-end tips to help reduce your 2018 personal income tax.
If you have investments that are outside of your RRSP or TFSA, then you pay tax on any gains that you make when you sell these shares. Note that just because the value of your investments have gone up, does not mean that you have a taxable gain. You only have a taxable gain when you sell the investment for more than you paid for it. It is possible that you have capital gains in 2018 and you do not want to pay income tax on these gains.
What is the plan? The stuck up term is tax loss harvesting. If you have some investments that are not doing all that well and you are considering getting rid of them, you should do so before the end of 2018. When you sell a share for less than you paid for it, you have a capital loss. A capital loss that you have in 2018 can be deducted from your capital gains in 2018 or can be carried back to 2017, 2016 and/or 2015. But, and this is significant, you cannot deduct a capital loss from anything other than a capital gain.
If you have capital gains in 2018, talk to your financial advisor soon to decide if you have any investments that you should sell at a loss before the end of 2018 in order to reduce your 2018 income taxes.