According to the Fraser Institute, Canadian families spent more on taxes in 2018 than on clothing, food, and housing combined.
Tax planning is one of the single most effective ways to save money. Here are a few strategies you can use to get the most out of your upcoming tax return. Be sure to check all the boxes before December 31st for the best savings.
Find Out Where You Stand
How much money have you spent, earned, saved, and invested this year? You should always have an accurate and up-to-date report on your financial standings for the year so you can plan for your taxes. Once you know which tax bracket you currently fall into, you can strategize when to take deductions and earnings to maximize your return.
A trusted financial advisor can create a strategic plan with regular reporting and check-ins so your questions are answered as they come up, rather than at the end of the year.
Consider Additional RRSP/RRIF Withdrawals
If your income is temporarily low, but you think it will increase in the coming years, you can withdraw money from your RRSP/RRIF accounts now to prevent paying higher taxes in later years. You can then use the funds taken from these registered accounts toward non-registered investments, TFSAs, and/or to re-contribute to your RRSP in higher income earning years down the road (if you have the room available).
Take Advantage of Tax Loss Harvesting
Tax loss harvesting allows you to sell non-registered investments that are losing value for a capital loss. You can buy these again in the new year, or you can buy them using your TFSA if there is contribution room available, to defer or eliminate tax on future recovery.
Working with a registered portfolio manager who includes tax loss harvesting in their overall strategy can help maximize your opportunities.
Plan to Incorporate Your Business
Incorporating a business offers numerous tax advantages when the timing is right. If it is, doing so before the end of the year could help save tens of thousands in tax. Generally, the rule of thumb is to incorporate when you earn more than you need to live on, especially if your available deductions and tax shelters are maxed out.
Consider Flow-Through Investments
Flow-through share (FTS) investments are purchased from companies in the energy sector, or in some real estate investments. In these strategies, all the expenses of the business are allowed to flow through to the shareholder in the year of purchase, creating a direct deduction on taxable income. Private Market Investments are provided through Raintree Financial Solutions.
Revisit Your Investment & Savings Strategy
What do the next five years look like for your family? What about the next ten? Twenty?
Life throws you many twists and turns, so it’s important to have a dynamic, long-term financial plan that you revisit with a financial professional on a regular basis.
Book Your Free Consultation
Register for your free financial consultation by contacting us. We’ll help you optimize your tax plan and create a spending, saving, and investment strategy that works harder for you.
