Capital gains on investment property

I will be selling some rental property later this year and will be triggering a large capital gain. Do you recommend I invest the funds in my son’s RESP to reduce the tax? —LEAH, Ottawa

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 adviser 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 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 feebasedadvisor. ca. Send home-related, financial planning questions to him at homes@ottawacitizen.com.