While almost everyone will agree on the importance of taxes when generating revenue for the government, most people want to save as much on taxes as possible. This is a valid concern for most Canadians. Profit Financial Services, a Hamilton bookkeeping firm, suggests these 4 tips to help save you money:
File your tax returns on or before deadline.
This may not sound like much of a tip. After all, you know that you have to file your tax returns, right? While that is true, many still see the Canadian Revenue Agency (CRA) as something to avoid until the last minute. The result of this is that people miss the tax filing deadline. They are then charged steep penalties. So, the first step in lowering your taxes is to file your returns on or before the deadline date.
Invest money, save on taxes.
Any personal finance guru will tell you that you should invest money to plan for your retirement and to save for emergencies. But did you now that investing money can also help you cut down your taxes? If you are an employee, you should maintain your contributions to the RRSP every year since your contributions to the fund are tax-deductible. If you have excess income you can just keep it and let grow, then try to look for investment programs that offer good returns.
As long as you keep your money in the investment program, you don’t pay any taxes; you only pay taxes on money withdrawn from your fund. A good fund to place your money in is the TFSA. In that fund there are no taxes charged on your investment earnings and your withdrawals are tax-free. Think about it: by investing, you’re saving for your future and saving (on taxes) in the present.
Take advantage of work-related tax-free perks.
You may think that taking advantage of more employee benefits may mean paying more in taxes. On the contrary, many of these benefits are actually tax-free. Tax-free employee benefits that you may want to use include: RRSP, work-related transferring or relocation costs, personal counseling, death benefits with a maximum limit of $10,000, education tuition and miscellaneous expenses, use of company fitness facilities, use of company child-care services and discounts on merchandise.
Splitting the tax bill among family members.
This plan works best with married individuals and seniors. For seniors who receive pension or Registered Retirement Income Fund (RRIF) payments, splitting pension income between spouses can significantly lower taxes and minimize the costs of Old Age Security (OAS). There are other pension plans such as the Canadian Pension Plan (CPP) open to you where income splitting can work to reduce your taxes. Please consult your accountant before considering an income-splitting plan since not all such methods are legal.
As you can see, the key to saving on taxes is using benefits, pension funds, investment packages, and tax laws to your benefit. Follow the four tips cited above by Profit Financial Services and you will see a reduction in your tax bite. Our Hamilton bookkeeping firm has been counselling Canadians on financial matters for decades.