This New Year’s long weekend is the perfect time to review your tax minimization strategies for the year ahead. Here are five things to consider as we head into 2018.
Tax-smart portfolio rebalancing
If you’ve got global equities in your non-registered portfolio, chances are you fared quite well in 2017 with some financial markets hitting all-time record levels. What a great opportunity to rebalance your non-registered portfolio and defer the capital gains tax hit by up to sixteen months.
For example, let’s say your target portfolio allocation is 70 per cent equities and 30 per cent bonds or fixed income. This weekend, you go online and see that your portfolio, due to the success of your U.S. equity position, at the close of business on Friday Dec. 29 is actually skewed 80 per cent equities and 20 per cent fixed income. To rebalance back to your target 70/30 mix, you may wish to sell some equities and replace them with fixed income. The good news is that if you put in your sell order on Tuesday Jan. 2, 2018, once financial markets re-open for the new year, the taxes owing on that capital gain won’t be due until April 30, 2019.