Are you ready to start to pay less personal taxes? Here’s a summarized guide on how to achieve that.

Maximize your deductions: CRA specifically allows certain deductions to reduce your taxable income and help you pay less tax. The most popular deductions are:

  • RRSP and pension contributions
  • Childcare expenses
  • Moving expenses
  • Spousal support payments
  • Employment expenses
  • Commission sales expenses
  • Work from home expenses
  • Interest on loans to earn investment income

Defer income: If you expect a change in your income that may affect your marginal tax rate it may be advisable to defer income to years in which you expect your income to be lower. RRSP contributions transfer income from your high tax working years to your lower tax retirement years.  

Tax credits:  Take advantage of all available Tax Credits such as:

  • Medical expenses
  • Tuition and tuition transfer from your children
  • Charitable Donations
  • The Disability Tax Credit for yourself or a dependant
  • The Home Buyers Amount
  • Student loan Interest

Tax Optimized Investing: Arrange your investments in a tax-efficient manner.  

  • Maximize your TFSA contribution to shield investment income from tax
  • Consider different tax treatments when arranging your investments. 
  • Hold fixed income securities in RRSP and TFSAs.  Interest income is entirely taxable and should be held in RRSPs and TFSAs to avoid taxes. 
  • Dividends from Canadian Corporations are eligible for the dividend tax credit and bear a lower tax burden than interest income. This benefit is lost when holding Canadian stocks in a registered plan. 
  • Capital gains. Did you know increases in value are only taxed when investments are sold and that only 50% of capital gains are included in your income? Again, this benefit is erased for holdings in your registered accounts. 

Pension Splitting; if you receive a pension, consider splitting your pension with your spouse to save taxes.

Arbitrage – shift income from one period to another, shift income from higher to lower years and higher to lower partners. 

A word about tax schemes. Despite being a CPA since 1997, we have never seen a successful scheme to multiply or magnify your tax credits.  We have however seen taxpayers fall prey to scams related to Charitable Donations, Investment Losses, Crypto and more. We’d be pleased to review and provide an independent review of proposed tax transactions. 

This blog is meant to be an introductory guide to pay less tax. Every situation is taxpayer specific and this advice is general in nature. We’d welcome the opportunity to provide a tax consultation or to share our comprehensive Personal Tax Planner Guide.

Give us a call to set up a consultation (905*831-6383) or click on the contact us link.