Tax Planning may give you several tax savings opportunities
By Mauricio Dreher
Everybody feels happy when the government sends a cheque for the Income Tax refund, but a good way to plan for your income taxes is to do it throughout the year, which may prevent you to pay these taxes every month, instead of waiting to receive the refund a few months later.
By using the tips below, you may increase your income tax savings:
During your Income Tax return, you may claim several deductions as well as there are several tax credits:
• If you bought you first home last year, you may claim the first time homebuyer and moving expenses credits.
• You may transfer some credits such as tuition credit to a parent in the case of a dependent
• Charitable donations may be claimed by husband or wife, so if you combine both which may increase your savings, as well as you may declare the donation this year, but claim the deduction up to five years later
• Medical expenses should be claimed on the lower earning spouse, to be able to increase your tax savings
Here are examples of Tax Deferral, which may help you to have more money today to be used for investments, pay your mortgage, etc.:
• Sell your investments with capital gains next year to defer tax on them. Also, you might be able to sell investments that are in a losing position by December 31 this year, so you create capital losses that can offset capital gains in the future
• If you are first home buyer and would like to use the Home Buyer’s Plan, consider doing it after December 31 to extend the period during which you can buy your new home, to extend the period for first repayment by an additional year, and provide an increased period for multiple withdrawals
• By investing in RRSP not only you save income taxes, but you also defer those taxes to be paid only when you withdraw, usually on retirement
You may also save some income taxes when you use the income-splitting strategy, via a spousal RRSP investment, pension income splitting with a spouse or paying a salary to eligible family members if you are self-employed.
Tax Planning may give you several tax savings opportunities, so you should talk to your accountant as well as your CFP – Certified Financial Planner, to check out if you may increase them throughout the year.