Q. I will be selling some rental property later this year and will be triggering a large capital gain. Do you recommend that I invest the funds in my son’s RESP to reduce the tax?
Leah, Ottawa
A. Despite many people’s confusion, there is no tax deductibility for RESP deposits so this strategy will not work to reduce the tax on the capital gain.
You should check with your tax and/or financial advisor to determine if you have any carried forward capital losses, any eligible RRSP room or any potential losses that you can trigger this year to offset this gain.
If the property is sold in 2013, any tax on the gain is due in April 2014 when you file your taxes, so you have the rest of this year to do some tax planning.
I would recommend that you consider putting aside sufficient funds to pay the tax bill next April. These should be held in a low risk accessible investment, like a high interest cash account, term deposit and/or GIC, ideally in a Tax Free Savings Account.
This article provides general information and does not constitute financial or other professional advice. Seek independent advice before implementing any of the strategies discussed.
Imran Syed, BA CFP CFSB TEP is an independent, Fee Only Certified Financial Planner and can be reached at www.feebasedadvisor.ca. Please send any home related, financial planning questions to him by email at homes@ottawacitizen.com
