Taxes aren’t something you should be thinking about when you are celebrating the holiday season with friends and family, but it never hurts to know some ways to minimize the taxes you will be paying for 2018. With tax season soon approaching, here are some sure-fire tactics to make sure you don’t overpay on this year’s taxes.
Take advantage of RRSPs and TFSAs
You likely already have a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA). These are two different investment vehicles, but they can both help with minimizing taxes.
Contributions to your RRSP can be used to
until you redeem that money later in life, after you have retired. If you are
currently in a higher tax bracket
than you will be after retirement, it is worth looking into contributing to your RRSP and seeing how you can save some money. You have
60 days after the end of the year
to still make contributions towards this year’s RRSP limit, so take advantage of it.
Splitting income with a spousal RRSP is
a common method of minimizing taxes
as well. If you or your partner will make significantly more than the other over the course of your lives, then you might consider a spousal RRSP. Talk to your financial advisor to make sure that this idea is a good fit for you.
For those that
do not fall in a high enough tax bracket
for an RRSP to make sense, consider investing into your TFSA. While you do not receive any tax credits or deductions for TFSA contributions, the interest made from these investments are not subject to tax, nor are any gains from trading within a TFSA on online platforms, like
Start planning for your children
We all wish that we would have started tax planning earlier. Luckily, you don’t have to make your kids go through that same mistake. There are some steps you can take now that will minimize both your taxes and theirs.
Setting your child or children up with a Registered Education Savings Plan is another common way of income splitting. You don’t get a deduction for contributing to your child’s RESP, however the contribution is
. This means that it will be subject to tax after it gains interest and is withdrawn from the investment. It is very unlikely that your child will be in a higher tax bracket than you once they start school, plus the government matches some of your RESP contributions.
Claim all earned income that your kids make, too. Even if it is a single shift at the movie theatre or a local paper route. This income might seem unimportant, but it will add up as they grow older and create more RRSP contribution room. This means they will be able to contribute more to their RRSP and get a better deduction when they need it most.
There are a number of credits that you can
claim for your children
, too. These range from childcare to things like transit passes. Programs like TurboTax should highlight these potential credit areas, as will accountants you speak with.
Don’t forget about your charitable donations
A lot of us donate to our favourite charities or non-profits, but many of us never claim the government tax credit for making those donations. The amount that you can get back in a credit depends on
how much you donated
but is easy to figure out.
Unfortunately, the first-time donor super credit is no more. 2017 was the last taxable year that it could be applied for. If you are a first-time donor or are unfamiliar with claiming charitable donations, the Canadian government provides a
useful calculator for you
You are putting your money where it is needed and helping those that are most vulnerable. Make sure that you get rewarded for your good deeds with your charitable tax credit.
Get started for 2019
It might seem like a drag to already be thinking about filing 2019’s taxes, but preparation will never hurt. Consider the three above tax minimization strategies throughout the year to maximize what you can get a credit for next year. If tax planning is something you are serious about, a consultation with an accountant might be beneficial for you.
There is another way that you can prepare for tax minimization, and that is to use your
mortgage or line of credit
to assist with your business or to purchase investments. If you want to pursue that option, take some time to talk to an 8Twelve Mortgage Broker. They will explore all your mortgage options with you so that we can save you as much money as possible.
Trust your 8Twelve Mortgage Broker to help you get the ‘best’ mortgage!