Terry McBride is a member of Advocis (The Financial Advisors Association of Canada). This article provides general information and should not be considered personal investment or tax planning advice.
 
As taxation year 2009 draws to a close, you can confer with your financial adviser to review your tax situation. Make sure you don't miss any important year-end tax deadlines.

Spousal RRSP

With the introduction of pension splitting in 2007, spousal RRSPs may now seem to be almost redundant. But, remember that many retired couples have no "eligible pension income" until age 65. For the pre-65 years of retirement, the spousal RRSP remains a very useful method of income splitting.

The challenge is to avoid the three-year attribution rule. Let's say that the higher-income spouse (Hi) contributes to a spousal RRSP for Lo. They want to begin making withdrawals in 2012.

To avoid attribution concerns, Hi needs to make the final spousal RRSP contribution before Dec. 31, 2009. By making zero spousal contributions in the two calendar years prior to 2012, Hi should never have to report any spousal RRSP withdrawals made by Lo.

Age 17 final RESP deposit

If your child turned 17 in 2009, then you should make sure you make one last Registered Education Savings Plan deposit before Dec. 31. Note that the year your child turns 17 is the final year of eligibility for matching government grants.

In addition to generating the current year RESP grant, you can still catch up on a limited amount of grants you missed for years since 1998.

Age 71 final RRSP deposit

If you have turned 71 in 2009, then you must convert your RRSP to a RRIF (or annuity) by the end of 2009. What if you're still working in 2009? Although you will create new RRSP room for 2010, your age will prevent you from making any RRSP contributions after 2009.

Consider making one final RRSP contribution before the end of 2009. This will be deducted on your 2010 tax return. Even if you face a one per cent penalty for excess RRSP contributions in December 2009, you will be able to claim your RRSP deduction for 2010.

RRIF withdrawal

If you are a retiree with low-bracket 2009 income, consider deliberately creating some more taxable income to take advantage of your lowest bracket rate. One way to boost your income level is to make a RRIF withdrawal before year- end to bring your income up $40,726, which is the threshold between the bottom and second federal tax brackets.

If 2009 is the year that you turn 65, your RRIF withdrawals begin to qualify as "eligible pension income" for pension splitting purposes. As well, you can claim the $2,000 federal pension credit for the first time.

Bond interest expense

Suppose, for example, you plan to buy a marketable bond that is scheduled to pay $2,400 of semi-annual interest in January. Along with the basic purchase price let's say that you must also pay $2,000 accrued interest to the vendor. You may want to buy the bond in December so that you can claim the accrued interest as a carrying charge on Schedule 4 of your 2009 income tax return.

Home Renovation Tax Credit

You can claim the HRTC on your 2009 income tax return for eligible expenditures that total more than $1,000, and up to $10,000, provided they are made between Jan. 28, 2009 and Jan. 31, 2010.

TFSA deposit

What if you made a $5,000 deposit to your Tax-Free Savings Account (TFSA) early in 2009? Then, let's suppose that you have made withdrawals from your TFSA to pay for a summer vacation and Christmas spending. Now you want to replenish some of that withdrawn capital as soon as possible. Please wait until 2010. Any further deposits that you make in 2009, will count as excess 2009 contributions, which are subject to a stiff one per cent per month penalty.