Good Tax Saving Strategies go hand in hand with good Investment Planning.
Take a longer view.
Don’t just think about your taxes at tax time - plan from the beginning of the year and look ahead. Life events, such as having children, buying a house, paying for education or caring for elderly parents can trigger significant tax opportunities.
Invest in a tax-wise way
When it comes to tax planning, it’s important to be aware of what’s in your portfolio and the tax implications. By continually looking at your short, medium, and long term goals you’ll be able to make tax-wise decisions.
Work with an advisor on an overall financial plan which includes tax planning
Elements of financial planning are best considered together — whether it’s your investments, taxes, or insurance, ask us to help you build a cohesive strategy so decisions are not made in isolation.
Keep in mind the 3 "D’s"
3 important functions in order to do effective tax planning.
- Defer – A deferral strategy is to try to push having to pay tax now into future years. Deferring tax means you might eliminate the tax this year but you will eventually have to pay the tax down the road. Generally tax deferral has 2 advantages: (1) It is better to pay a dollar of tax tomorrow than it is to pay a dollar of tax today and (2) Tax deferral typically puts the control of when you have to pay the tax in the hands of the tax payer instead of in the hands of the Canada Revenue Agency (CRA). RRSPs and various investment income strategies are the most common forms of tax deferral for the ‘average’ Canadian.
- Divide – Often called income splitting, dividing taxes implies the ability to take an income and spread it among a number of different taxpayers.
- Deduct – A deduction is a claim to reduce your taxable income. A deduction will reduce your tax bill by an equal amount to your marginal tax rate.
Did you know that you can deduct:
- Interest expense
- Union/professional dues
- Alimony/maintenance payments
- Employment expenses
- Moving expenses
- Professional fees
- Child care expenses
- Pension plan contributions
Sometimes tax planning will bring immediate benefits but often the benefits of tax planning take time to feel the rewards. Many people are scrambling to get their taxes done for the current year but it is probably too late to do any planning for the previous year.