Q – I’ve completed my tax return, and I actually had taxes owing. It was a shock, and I had to scrape up the money from funds that I had earmarked for other purposes. I don’t want to go through that again. What can I do now to reduce my tax burden for this year? – Rajeev S., North York, Ontario
A – There’s only one answer to that: Plan ahead! The key is to make sure you’re getting all the credits and deductions you’re entitled to – and there are plenty of them, as I’ve shown over the past month or so. I don’t know the details of your tax return, but if you’re self-employed or a business owner, you can take advantage of a host of business-related deductions. If you’re employed and receive a regular paycheque, make sure your withholding amounts are calculated properly so that neither too much nor too little is withheld from your paycheque.
Open a Registered Retirement Savings Plan (RRSP). Any income that you earn in the plan is exempt from tax for as long as the funds stay in the plan. RRSPs help you save for your retirement and give you a break at tax time too through a deduction for the amount you contribute.
A Tax-Free Savings Account (TFSA) is also a great way to save money, because you don’t pay tax on any income you earn from investments within the TFSA. The current contribution limit for a TFSA is $5,000 annually, and while the money invested is not tax deductible, you will not have to pay tax on any of the funds you withdraw from your TFSA. The only requirement is that you be a Canadian citizen and 18 or over.
I’ve just scratched the surface here. Check with a financial advisor for more ways to cut your tax bill through the year. – R.T.
Robyn Thompson, CFP, is the founder of Castlemark Wealth Management, a boutique financial advisory firm, specializing in customized financial, investment, insurance, and retirement planning. Phone 416-828-7159 or email today to firstname.lastname@example.org for a no-obligation, no-charge Castlemark Integrity Financial Planning consultation.
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