Think ahead to the last week of February. Yes, you know what that time of year inevitably brings – the same frantic search for cash and investment alternatives for your RSP contribution.

Or, you can miss the mad annual rush by reviewing your tax situation now and taking advantage of some year-end strategies that are still available. Let’s explore some of the options that we have at our disposal.

* CONTRIBUTE TO AN RSP:

By making an RSP contribution, you are able to claim an equivalent deduction from your income before calculating your tax payable. This immediate deduction then can be used to make an RSP contribution next year or to make a payment against your mortgage or some other form of after-tax debt.

Another benefit of an RSP contribution is the effect of tax-sheltered accumulation.

Any income that your RSP earns is tax-sheltered as long as it remains inside your RSP plan. Revenue Canada does not get a share and your income goes 100 per cent to work (it fully compounds).

The longer your money remains sheltered, the greater the earning power of your RSP.

If the income was earned outside of your RSP, then you would have to pay tax every year, and this would reduce your portfolio’s value every year. An RSP shelters this taxation effect.

* TRANSFER CASH INVESTMENTS TO AN RSP:

Consider transferring your non-registered (cash) investments to an RSP, provided you have the contribution room. Then consider borrowing to duplicate your cash investment. This technique allows you to:

1) make the interest on your cash investments tax deductible;

2) make a contribution if you have no new cash to contribute;

3) create the tax-sheltering of that contribution.

* BORROW TO CONTRIBUTE TO AN RSP:

With the cost of borrowing still relatively low, borrowing makes sense to purchase RSPs to use up any unused contribution room. The tax savings you gain, plus the tax-sheltered growth inside your RSP, will most likely outweigh the interest costs.

* TRIGGER CAPITAL LOSSES:

If you were fortunate enough to have made some profits on some investments earlier in the year and are worried about a potential large tax bill, then you may want to sell some of your losers before the year-end. This way, the capital losses can help offset some of your earlier capital gains. Remember that under the superficial loss rules, the loss would be denied if the same investment is acquired or reacquired in the 30 days prior to the sale or 30 days following the sale.

* HIRE YOUR CHILDREN: If you own your own business and you have children, you should consider hiring your children to do some work for you.

Provided the children are deemed to be working, you can save taxes by paying them a reasonable salary.

This salary would be a deductible expense to you and would be taxed at a lower rate in your child’s hands.

* LEND MONEY TO FAMILY MEMBERS:

You can lend money to family members at the prescribed rate set out by Canada Customs and Revenue Agency and thus avoid attribution back to you on any income earned on the lent money.

The family member must pay the interest to you by January 30 following the year the loan is outstanding and this income becomes taxable for you.

The family member will be able to deduct the interest paid on the loan. Income splitting will be successful if the investment return exceeds the rate of interest charged.

* RESP CONTRIBUTION:

December 31 is the deadline to make contributions to a Registered Education Savings Plan. The maximum a subscriber can contribute to an RESP is $4,000 per year.

The government is still offering the 20 per cent Canada Education Savings Grant (CESG) for each child on the first $2,000 contributed.

* SOME FINAL THOUGHTS:

By reviewing your tax situation now, you can perhaps avoid some surprises at tax time and even save paying some taxes.

These are just a few strategies available and should be considered and encouraged throughout the year.

Your investment adviser can analyse your investment objectives and determine an appropriate RSP strategy for you.

I always recommend consulting a tax professional for advice specific to your particular situation.

(Anthony Tobias is branch manager with Great Western Financial Corporation in Calgary. These ideas are those of Anthony Tobias and do not necessarily reflect those ideas of Great Western Financial Corporation.)