Year-end planning tips for professional service providers
Year-end planning tips for professional service providers
Set yourself up for a successful 2025. Optimize your tax planning, review your insurance coverage and safeguard the value of your practice. With proactive steps now, you’ll be ready to embrace new opportunities, protect your hard-earned progress, and achieve your goals in the new year.
As a busy professional, the year-end can feel daunting, with ever-changing requirements and tasks. However, it’s also a great time to take a step back, evaluate your professional goals, and consider the adjustments needed to achieve them.
Here, we outline several benefits, resources, and tips to help set you and your practice up for a successful new year.
Tax
Capital gain selling
The 2024 federal budget proposes increasing the capital gains inclusion rate for corporations from one-half to two-thirds for gains realized on or after June 25, 2024. For individuals and certain trusts (graduated rate estates and qualified disability trusts), the proposals include an increase for capital gains exceeding $250,000 realized on or after this date.
While the legislation has not yet passed into law, it’s widely anticipated to take effect on June 25, 2024. Individuals might consider realizing any capital gains to utilize the $250,000 limit at the 50 percent inclusion rate before the end of 2024. If selling investments, consider the expected rate of return and your time horizon for required funds.
Most financial institutions indicate that December 30, 2024, is the final trade date to ensure transactions apply to the 2024 taxation year. Consult your financial advisor before realizing any capital gains.
Alternative minimum tax
Changes to the Alternative Minimum Tax (AMT) were implemented in 2024. This modified calculation for determining tax liability allows fewer credits, deductions, and exemptions than standard rules. Taxpayers will pay the higher amounts calculated under the ordinary method or AMT.
The AMT affects individuals whose taxable income exceeds $173,205 in 2024. If you use the capital gains deduction (e.g., for qualified small business corporation shares), receive significant dividend income, realize large capital gains, purchase flow-through shares, incur limited partnership losses, or make substantial donations, AMT may apply.
Although the full AMT amount can be recovered with advanced planning, it may temporarily impact cash flow.
First home savings account
If you’re considering purchasing your first home, the tax-free first home savings account (FHSA) is an option to explore. Contribution room accrues only after opening the account, so it’s beneficial to act quickly.
Opening the account before the year-end allows you to take advantage of the $8,000 contribution limit for 2024. Contributions can grow tax-free for up to 15 years, and withdrawals for purchasing a qualifying home will not be taxable.
Enhancement to home buyer's plan
The 2024 federal budget increased the home buyers’ plan limit from $35,000 to $60,000 to help first-time home buyers leverage RRSP contributions for home purchases after April 16, 2024. Additionally, the repayment grace period has been extended to five years.
Tax instalments
If you’re making tax instalments for yourself or your practice, ensure all payments meet the deadline to avoid interest and penalties.
Insurance
Insurance coverage review:
A year-end review of your insurance coverage can ensure it aligns with your needs and risk tolerance. An advisor can help assess coverage limits and values.
Key types of insurance to consider:
- Errors and omissions - Protects against claims of inadequate work or professional negligence, offering financial protection and funding legal support when necessary.
- Commercial general liability - Particularly relevant for professionals operating in commercial buildings, this coverage offers a safety net against property-related risks and general liabilities.
Risk management
Will and document review
Review your Wills, Powers of Attorney and Personal Directives to confirm the align with your legacy wishes and other documents, such as Shareholder Agreements or beneficiary designations.
Financial planning
Reviewing or creating a financial plan benchmark where you are now, identifies goals, and outlines steps to achieve them. Work with an advisor to develop a robust financial roadmap for long-term success.
Contingency planning
Having an emergency or contingency plan ensures your practice can operate smoothly during unforeseen circumstances. Addressing potential risks in advance can protect daily operations and critical decision-making.
Value protection
How much of your practice’s value relies on your goodwill and leadership? A formalized succession plan safeguards your practice’s value and offers peace of mind for your family and partners.
We’re here to help
Our experienced team at MNP is ready to help you achieve your goals for your practice, no matter what stage you’re at.
Nicholas Talarico , CPA, CA
Michelle D. Coleman , CPA, CA, TEP, CEA
Sheetal Esmail , CPA, CA
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