Tax Planning in a Questionable Future Tax Environment | General financial discussion | Discussion forum

dougjp said

Myself I'm making a small stock sale to generate capital gain in 2020 that I hadn't thought about seriously before. Crazy or?  

It is not crazy at all. Even if tax rates were unchanged, it is prudent to try to spread one's capital gains over a number of years if possible. Sure beats having to sell and take all the gains in one year, possibly in a higher tax bracket.

Consider selling stock that has a capital loss to offset capital gains, otherwise, you may be in a position where Tax Installments are necessary in 2021.

Note: You shouldn't re-purchase these stocks for 30 days otherwise it will be deemed a superficial loss and disallowed loss.

However, you could purchase a similar stock within the same sector i.e. Sell Suncor for a loss but buy Exxon, Chevron should you want Oil exposure.

Regarding the OAS clawback, note that that threshold calculation is done before applying any capital loss amounts applied from previous years. For example, if you have a net taxable capital gain of $30K in a year that's how much will count towards your net income threshold calculation for OAS clawback purposes, even if you use/apply an offsetting $30K capital loss amount available from previous years to offset the current year's $30K gain.

Exactly, topgun, it's line 23400 that is used for OAS clawback purposes even though you might have an offsetting amount later on line 25300 to the taxable capital gain you reported in the amount on line 23400.

Yes, dougjp, line 23400 will say $55K in your example, even though you might be able to offset the $5K taxable capital gain because you have $5K net capital losses from previous years carried to line 25300 and thereby bring your taxable income back down to $50K. The OAS clawback threshold calculation looks to line 23400, that was my only point above. So I disagree with your comment "they add the full gain to determine total income - can make a big difference re: OAS.", line 23400 only contains the 50% taxable capital gain amount for the year.

I find taxtips.ca reliable for finding out the various thresholds when taxes kick in or end. The figure for OAS clawback for 2020 is correct at 79,054 "net income".

For anyone who wants to know, Federal tax rates change in 2020 at incomes of 48,535 and 97,069 and some above that which i don't have handy.

Quarterly payments don't kick in until you have two years out of three that you owe over 3000. This problem can be lessened by taking voluntary deductions from OAS or other pension income throughout the year. For those who don't have capital gains or losses to deal with, income can also be manipulated by making voluntary RIF withdrawals and having tax deducted at source to top up your bracket and possibly avoid being in a higher bracket later.

FWIW, I don't foresee significant increases in income taxes per se in the foreseeable future. Depending on who is in power, we may see various temporary taxes, a special health care tax, inheritance tax, consumption taxes, service cuts and delays, outsourcing, privatization, and so on.
One way or another, we will all be made to pay, and some of us already are, in loss of employment or reduced income through falling interest rates. In my view, these things are much more serious than what you should do about capital gains because they will affect everyone.
As for whether you should claim capital gains/losses, I think Bill is right. Do what works for you right now.

And if you made a profit or can afford it, you can reduce your taxes further by making a charitable donation. You can donate stocks directly, which I believe is an even better deal (haven't checked recently). And, just so you know I put my money where my mouth is, spouse and I have donated to 8 charities this year and will give to one more, despite reduced income. A lot of people and helping organizations can really use some help from the more fortunate right now.

Excuse me if I scoff at the idea of a "temporary tax" Remember, in many places income taxes were introduced as "temporary" measures to pay for various war efforts.

Given the existing tax burden and the decreasing return on further tax increases I think the greater danger coming is devaluation and its subsequent effects as it will be the only appreciable way for the federal government to get out from under this spending balloon. How one plans for that is open to debate.

I second the great free calculators at TaxTips.ca Every December and January sees me playing with them endlessly as I plan my remuneration for the coming year. Its not about how much you make, its about how much you keep.

dougjp said
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Myself I'm making a small stock sale to generate capital gain in 2020 that I hadn't thought about seriously before. Crazy or?

That may not look so great in hindsight. Tax-driven investment decisions don't tend to work out well. Remember those labour-sponsored venture capital funds?

Since I started investing, the capital gains inclusion rate has gone from 50% to practically 0% (capital gains exemption) to 66 2/3% to 75% and then back to 50%.

The best approach was to do nothing different.

There are lots of ways to structure capital gains tax changes. When income taxes on capital gains were introduced in 1972, the taxes only applied to any appreciation after December 31, 1971. That continues to apply today.

The fair market value on December 31, 1971 is still used for any capital property acquired before then for calculating taxable capital gains.

make the principal residence capital gain taxable will cool down the housing market and earn the govt a decent revenue.
Its a much more sensible approach than bumping capital gain inclusion rate up, which is the NDP way of targeting the rich. What the economy needs is to encourage capital investment, not penalize the investor.