Category: Tax Tips

News: Extended Tax Filing Deadline for some of us

RobHLeave a comment

Summary: If you have capital gains to report for the 2024 tax season, your tax filing deadline has been extended by a little over a month, until June 2, 2025.

Much ink has been spilled about the proposed/delayed/killed changes in the tax treatment of capital gains in Canada. All the fuss simply means that some of us get an extension to our 2024 tax filing deadline. Does it apply to you? It might. Here are some1 scenarios where you might get a chance to file a bit later.

You Have a Non-Registered Investment Account? Read on.

Some people get confused over capital gains. Capital gains don’t apply to TFSAs, RRSPs, RRIFs, LIRAs or FHSAs. So if that’s all you have for your investments, you don’t need to worry. But if you do have a non-registered account, then the extended deadline may apply to you.

Did you get a T3 or T5 slip? Read on.

Box 21 of the T3 slip and box 18 of the T5 slip shows capital gains realized by funds you held in 2024. If you have values in these boxes, then you can procrastinate!

These boxes will be non-zero if you held ETFs or mutual funds that sold shares behind the scenes and made a profit. My go-to investment asset-allocation ETF (XGRO) made capital gains of nearly 15 cents per unit held2, per https://www.blackrock.com/ca/investors/en/literature/tax-information/distribution-characteristics.pdf.

Some people are confused by the idea of having to declare a capital gain on an asset they didn’t touch in the course of the year. While you didn’t do anything, the people who manage the fund on your behalf did. The alternative would be to hold individual stocks yourself, but I myself prefer the massive diversification of funds like XGRO.

Did you SELL an asset in a non-registered account in 2024? Read on.

In many circumstances, the sale of a stock/ETF/mutual fund/foreign currency3 in a non registered account will generate a capital gain. While this scenario doesn’t apply to me in 2024, in 2025 it certainly will since part of my retirement income comes from this exact source.

None of this applies? No extension for you, probably.

If you answered “no” to all the previous questions, then you should file your taxes per the usual deadlines. And even if you answered “yes”, there’s no harm in filing your taxes anyway, since modifying a filed return is pretty easy to do online. Be aware, though, that some providers may delay getting T3s and T5s to you, so if you’re expecting these documents and haven’t seen them yet, you should probably wait for them before attempting to file. The providers I deal with typically don’t issue all documents until the last week of March, so I’ll get started on filing my own taxes starting in April.

  1. There are almost certainly other scenarios where you get an extension. I’m not an accountant or a tax lawyer. Caveat emptor. ↩︎
  2. In my case, I don’t actually hold XGRO in any non-registered account at the moment. It’s all in RRIFs/TFSAs where I don’t have to worry about such things. ↩︎
  3. Interactive Brokers issued me a statement showing me the money I made buying and later selling a chunk of USD in 2024. That counts too. ↩︎

Death, Taxes and Estates: Part 2

RobH5 Comments

I am not a lawyer, accountant or tax expert. Your situation may be a lot different than mine. Seek professional guidance if needed.

Part 1 of this blog is found here.

I’m still wrapping up the estate of my late mother, who died a little over a year ago, a year and a bit after my father died.

My situation

All my mom’s worldly assets were held with BMO Investorline: RRIF, TFSA and a non-registered account. This was a self-directed account; the relationship with BMO (as I came to learn) was pretty informal. Me and my siblings were named as beneficiaries of the estate, and my Mom had taken steps to name us as beneficiaries for the RRIF and TFSA. More details about how that works were covered in a previous post.

First weeks

I had ready access to estate cash because I was named as a joint account holder on my Mom’s chequing account1. This is a very useful thing to have in place, since it can cover expenses incurred after death: funeral costs, moving expenses are two that come to mind. I treated this account as part of the estate, but it allowed me to spend the estate’s money instead of my own for these things.

DIY Estate Handling

Informing BMO Investorline2 of my mother’s death was required, and that took a single call to the general help desk. After about a week I had an initial meeting with their estate department.

Once I provided proof of death, all accounts were frozen and I could no longer even see what was in them. BMOI correctly noted that we were the beneficiaries of the TFSA and RRIF and we started the paper-intensive3work of liquidating and distributing the assets held in those accounts. I checked my notes — it took about 2 months for that step to be fully completed.

What was unexpected was that BMOI gave us ALL the money in the RRIF, with no taxes withheld. From a tax perspective, a RRIF is treated as income in the hands of the deceased on the day they die. For most people, that means a substantial tax bill for that tax year. So as an executor4, I had to be VERY sure that my Mom’s non-registered account could cover the tax bill that would eventually come. Using a tax calculator helped a lot.

The non-registered account, where the bulk of the assets lay, would require a probated will, as I expected. This account remained locked and frozen.

Probate and probate fees

In the very simplest terms, probate means getting a court to certify a will as accurate. And when you think about it, it makes sense that financial services companies want to be VERY sure that the executor (aka estate trustee) is in fact the correct person.

After doing a bit of reading (mostly this source) I decided I could tackle it on my own. This was made significantly easier by the fact that I lived in the same city as my mother, and I had access to a courthouse were I could take my completed forms.

When filing your probate papers, you also have to pay probate fees (aka Estate Administration Tax), which means you have to know the total value of the estate on the day of death. BMOI was able to provide me statements up to that day so I had a to-the-penny accurate assessment of the value held there. BMOI was also able to write a cheque to the Ontario Minister of Finance for these fees using funds available5 in the non-registered account. This meant I wouldn’t have to front the money myself.

Probate fees, in my Mom’s case, were not particularly large (not compared to the estimated tax bill), and since RRIF and TFSA were not part of the estate, they were also lower than they could have been.

After filing, the wait for the court-certified document began. I had very low expectations (I had conservatively estimated a 6 month delay here), but I actually had the probated will arrive in the mail a month later, which was about 4 months after my mother’s death.

Using the Probated Will

With a probated will in hand, I could now unlock the non-registered funds in my Mom’s estate. This required me to open an estate account with BMOI and then transfer the non-registered funds to it. After all that paperwork, I once again had full access to the assets that were formerly held in my Mom’s non-registered account — I could log in to the portal, see the holdings, and most importantly, perform transactions myself at the usual self-directed transaction fees.

I sold all the assets (mostly ETFs, naturally) and partially distributed them to the beneficiaries. Distributing the assets was admittedly (again) more challenging than I thought. Since I was quite familiar with how BMOI worked, I requested AccountLink cheques for the estate account, figuring this would be the easiest way to distribute the funds6. This resulted in a bit of a runaround, but eventually I got a box of cheques sent to me. I held some money back7 so I could pay the 2025 tax bill; this money I invested in a HISA.

Preparing for Tax Season

In late 2024, I removed the remainder of the estate from the HISA account. This was done so as to not have any income generated by the estate in 2025. This simplifies the tax filing considerably.

After doing a bunch of reading, I gave up on the idea of attempting to do the taxes myself. I knew there would have to be both a Final Return (for my Mom) and an Estate Return (aka a T3 return) but I wasn’t really sure about all the steps, and of course CRA’s website isn’t really designed for the layperson to figure this stuff out easily. There was also the matter of filing a CRA clearance certificate. I hired a pro to figure all this stuff out. As it turns out, my Mom’s estate qualified as a GRE Trust, which is, as I understand it, pretty typical. That would appear to offer some potential tax benefits, but I’ll have to wait and see and this point.

  1. It didn’t hold a significant amount of money. Larger sums could conceivably attract the attention of CRA as a bare trust. ↩︎
  2. Hereafter referred to as “BMOI”. Laziness. ↩︎
  3. Actually, mostly filling out PDFs and sending them back over secure messaging ↩︎
  4. If the estate can’t pay the taxes, then the executor is legally obligated to pay ↩︎
  5. Like all matters estate-related, this took a lot of effort. Having sufficient funds when my mother was alive was a very simple process: log on to the portal, sell some shares, wait a few days, get the money. In an estate scenario you have to write a letter of direction to indicate what, exactly, to sell. Then you wait a week or two. Then you get angry at the fact that they charged you $40/trade. Then you write another letter of direction to indicate who to write the cheque to. Then you wait a week for the cheque to arrive. ↩︎
  6. I’m not really sure how the mechanics would work with a broker that doesn’t have bank services. EFT I guess? ↩︎
  7. Probably more than I needed to hold back, but I wasn’t taking chances. ↩︎

Caution! Spousal RRSP/RRIF Attribution Rules

RobH5 Comments

Summary: The spousal RRSP is a great way to reduce current taxes, but if you’re planning on using the money in that spousal RRSP soon, be aware of the rules concerning who declares the income!

Disclaimer: As this article will demonstrate, I’m not a tax expert, lawyer, CPA or anything else. Use with discretion, some assembly required.

I made substantial use of spousal RRSPs during my working life. Spousal RRSPs are a way for the higher earning spouse to take advantage of the lower earning spouse’s unused RRSP contribution room, thus leading to a lower overall tax bill1. All good so far.

Some vocabulary will help with the next bit.

  • The contributor is the person providing the cash for the spousal RRSP and is the one who gets the tax deduction. Usually this is the higher income spouse.
  • The annuitant is the person whose name is on the spousal RRSP statements. This is usually the lower income spouse.

What most primers on spousal RRSPs don’t mention is that there is a restriction when it comes to withdrawing from the RRSP2. Paraphrasing the source material:

If the annuitant withdraws from a spousal RRSP within three years of the last contribution, the income from that withdrawal is considered to belong to the contributor, not the annuitant.

What? Why?

As with all things, there’s no free lunch. CRA doesn’t want to make tax avoidance so easy3, so this little detail will prevent the purely hypothetical scenario of a higher earning spouse making a large spousal RRSP contribution in the last year of their employment, and then getting the lower earning spouse to take out that same money at a much lower tax rate when the calendar moves from December to January.

There is one, small, bone that CRA throws our way in this case. Paraphrasing again:

If the annuitant withdrawal is instead made via a spousal RRIF, and the payment is RRIF minimum, then fine, the annuitant can declare that income.

So, as long as our lower income annuitant spouse opens a spousal RRIF, and as long as for the three years4 following the last spousal contribution, that spousal RRIF only pays out RRIF minimums, then all is well. The annuitant spouse declares the income, as expected.

Now of course, this rule may not matter to you. If you’re newly retired and don’t have much in the way of income, then it may not trouble you that you have to declare the income from your spouse’s spousal RRIF/RRSP. It’s just a bit more paperwork (a T2205, looks like).

In my case, I’m only taking RRIF minimums for the time being. So no extra paperwork for me.

  1. And future income splitting before the age of 65 when the option becomes available to all. ↩︎
  2. I’ve never myself made a withdrawal from an RRSP. That would break my rule of keeping retirement savings firewalled. And it looks to me to be an expensive proposition — your provider will surely charge a deregistration fee, your provider will have to withhold tax, and you have declare the full amount as income in the year you grab it. ↩︎
  3. I have learned to be guided by the humbling tenet of: “If I think I’ve figured out a way to outsmart the taxman, it’s probable that I’m simply demonstrating an incomplete understanding of how it actually works….” ↩︎
  4. To illustrate/clarify: the rule applies in the year the contribution is made, and the previous two years. So the contribution I made in 2024 will be free from all constraints in the 2027 tax year. ↩︎

Donate TODAY to save taxes in 2024?

RobHLeave a comment

Sorry if I’m a bit late to the party here, but CRA has generously(?) extended the period whereby you can make a charitable donation and have it count against LAST year’s tax calculations.

Because of the postal strike, CRA is letting you claim donations made until the end of February 2025 on your 2024 taxes. If you’re looking for a good way to reduce your 2024 tax bill, a donation to a worthy charity in the next month would be a great way to do that! (And don’t worry that your tax receipt shows “2025”, CRA says they will honor it with only a few exceptions — charitable donations via payroll deduction and donations made from an estate.)

Generosity to registered charities has always been a good way to reduce taxes (and in the future I’ll talk about the BEST way to do that — by donating shares directly from your non-registered account).