The year 2006 is rapidly drawing to a close. Our thoughts are turning toward the festive season, family and celebration.

The year-end also brings another deadline well worth considering. With the exception of RRSP contributions and a few other tax strategies, you have until December 31 to take any final action related to your tax reduction plans for 2006.

Here are a few ideas and suggestions that you may wish to look at before the end of 2006. Alternatively you may wish to implement these ideas to reduce your income tax bill in future years.

Inevitably, as an investor you will have some investments that increased in value and others that declined in value. You may want to sell your losers and apply the loss against your gains. Typically these transactions must be made before Friday December 22 in order for the trade to settle and be eligible for use in 2006. Capital losses can be used in the current year or back three years or carried forward indefinitely.

If you are going to buy an interest-bearing investment with a maturity of one year or more, and it is held outside your RRSP, wait until after December 31, 2006. By waiting until January 2007 the first anniversary for interest earned will be January 2008. The interest income will be reported in the spring of 2009 on your 2008 tax return.

Make your charitable donations before the end of the year. You may want to consider donating publicly traded securities. Any resulting capital gains on donated securities after May 1, 2006 are not subject to tax and you receive a donation receipt for the full market value of the donated investment. It may make more sense, from a tax point of view, to donate securities rather than cash.

There are a multitude of ideas and strategies one can use to reduce taxes. Whether you’re considering tax shelters or charity donations you should speak to your financial planner to go over your ideas and discuss any last minute tax strategies that can be completed before the year closes.

So while you are mulling over the decision to go with turkey or ham for your holiday feasting, you may want to devote a little time toward tax planning. These and many other tax reduction strategies should be practiced year round, not just at year-end. Happy holidays and best wishes for a prosperous 2007.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of Fundex Investments with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca.