Tax-saving tips: Operating this way, < Tax-saving tips: Operating this way. Your family's return on investment will significantly improve because the income generated by investments will be taxed at the rate of the lower-income spouse. A common problem currently is that most families may do just the opposite. Every year, after working hard to earn money, < < After working hard every year to earn money. Nearly half has to be paid in taxes—doesn't that make you feel tired or dissatisfied? Below are tax-saving strategies gathered from financial experts across Canada to help you effectively reduce your and your family’s tax bills, ensuring more funds go into your own pocket during the next tax season.
1. Set up an RRSP automatic contribution plan
Set up a full-year automatic contribution plan for RRSPs, < Set up a full-year automatic contribution plan for RRSPs. This plan either deducts directly from your paycheck account or automatically deducts monthly from your bank account and deposits it into a registered retirement savings plan.
Tax-saving tip: Consistently contribute $100 monthly to RRSP assuming a 6% annual return, after 35 years, the RRSP retirement savings will reach $138,< Tax-saving tip: Consistently contribute $100 monthly to RRSP assuming a 6% annual return, after 35 years. 029; while an annual lump-sum contribution of $1,200 results in RRSP retirement savings of $131,272. For the same amount, there is nearly a $7000 difference.
2. Borrowing to save
If you don’t have extra funds available to contribute to RRSP, < If you don’t have extra funds available to contribute to RRSP. Consider borrowing to contribute. Compared to not contributing to RRSP, borrowing to contribute might be better due to the long-term tax-deferred growth advantage and compound interest growth advantage within the RRSP plan which far outweighs the interest cost of borrowing.
Tax-saving tip: If you have high credit card balances, < Tax-saving tip: If you have high credit card balances. It might be more meaningful to promptly pay off these credit card debts compared to borrowing for RRSP contributions.
3. Avoid receiving too much refund
Although getting a larger government refund, < Although getting a larger government refund. Is quite satisfying and enjoyable. In reality, receiving too much of a one-time government refund indicates poor tax planning. Think about it, isn’t getting a refund equivalent to giving the government an interest-free loan?
Getting this refund means the government has used your money free of charge for 12 months, which could have earned you interest or some investment returns.
To get this money back sooner, < To get this money back sooner. You can ask your employer to provide you with a T1213 form to reduce the tax withheld from your salary each month.
Tax-saving tip: Assume you have a $200,000 mortgage, < Tax-saving tip: Assume you have a $200,000 mortgage. With a repayment term of 25 years and an interest rate of 6%, saving $150 in taxes each month can be used to overpay the mortgage, resulting in paying off the mortgage 5 years early — saving $43,254.
4. Spend less
Spending less, < Spending less. Can reduce your tax bill, which is one of the easiest overlooked ways. Always focus on "how to reduce personal income tax" but forget the additional taxes (or provincial taxes) paid when purchasing goods or services.
Tax-saving tip: Appropriately control your desire to purchase, < Tax-saving tip: Appropriately control your desire to purchase. By keeping your purchases to a minimum, you can also effectively avoid unnecessary spending.
5. Invest in your children
If you have children of school age, < If you have children of school age. Consider contributing to a Registered Education Savings Plan (RESP). While you won’t get a tax deduction, the tax-free profit growth can last up to 31 years or until the child needs tuition and withdraws the funds.
Tax-saving tip: Contribute $2, < Tax-saving tip: Contribute $2,500 annually for each child under 17 years old to receive at least a 20% education grant from the Canadian government, which equals $500. Why not take advantage of it?
6. Benefits for self-employed individuals
If you own your own business, < If you own your own business. Consider paying salaries or wages to your children or low-income spouse. The portion of the salary or wage paid will directly reduce your income.
For example, Bamba runs a small family business, and his daughter does some basic work like organizing documents and answering calls, so Bamba pays her necessary salary rather than simply maintaining her basic exemption, making the family's tax effect optimal.
Tax-saving tip: If you work from home, < Tax-saving tip: If you work from home. You can also deduct all qualified property expenses, mainly including mortgage interest, property taxes, and utilities.
7. Calculate moving expenses
For each individual or family, < For each individual or family. Although moving is not an easy task, there are some tax relief measures that can help ease the pain of moving. If you need to move at least 40 kilometers away for a new job or business, the reasonable moving costs incurred can be claimed as deductions.
Tax-saving tip: Many moving expenses are often overlooked, < Tax-saving tip: Many moving expenses are often overlooked. Because people don't know how to use the deductible moving expense list. Go to the Canada Revenue Agency website www.cra-arc.gc.ca/tax/individu and search for the "move" sub-item to find out completely.
8. Summarize all medical expenses
Many people mistakenly believe they don't have enough medical expenses, < Many people mistakenly believe they don't have enough medical expenses. To get a tax credit. Actually, any costs not covered by group insurance plans and any health insurance costs incurred at work should be considered, don't forget.
The deductible amount is the lesser of $1,962 or 1/3 of net income.
Tax-saving tip: You can designate any 12-month period within the tax year as the expense reporting phase. For the 2009 tax filing, < Tax-saving tip: You can designate any 12-month period within the tax year as the expense reporting phase. For the 2009 tax filing. You can choose June 2008 to May 2009 as the reporting phase. Choose the expense reporting period that maximizes various expenses to obtain the maximum credit.
9. Claim childcare expenses
Many parents think, < Many parents think. If a neighbor is helping to look after their children, they don't need to claim childcare expenses. However, if you paid and received a payment receipt, you can claim childcare expenses.
Tax-saving tip: Generally, the lower-income spouse claims this expense. That is, the deduction is based on the lesser of two-thirds of your income or the actual childcare costs incurred by the child. Additionally, for children under 7 years old, the maximum annual claim amount is $ dollars; for children aged 7 to 16, the maximum annual claim amount is $4,000. Ensure that all children under 16 years old have this expense claimed on the tax return.
10. Don't overlook child disability credits
If your child has a severe long-term physical or mental disability, < If your child has a severe long-term physical or mental disability. Don't overlook the child disability benefit. To apply for the child disability benefit, you must complete and have a qualified doctor sign the T2201 form. These forms take a whole year to process, so you don't have to wait until it's time to file your tax return to start the application.
11. Tax benefits for returning to school
When you return to school, < When you return to school. You face rapidly rising tuition fees. At this point, even a little tax benefit can be quite helpful. For example, participating in full-time study gives you a tax credit for tuition ($400/month) and book fees ($65/month).
Tax-saving tip: Any tuition and educational expenses after high school can generate tax credits, < Tax-saving tip: Any tuition and educational expenses after high school can generate tax credits. This benefit won't decrease if you transfer tuition from someone else in your family to yourself.
12. Canada Child Tax Benefit
In the past year, < In the past year. If your family has a new member and you belong to a low-income household, ensure you've applied for the Canada Child Tax Benefit (commonly known as "milk money").
Tax-saving tip: For each child, < Tax-saving tip: For each child. You can receive up to 15 years of the Canada Learning Bond, $100 per child annually. Also, for every child born after January 1, 2004, you receive a $500 learning bond at birth. More details can be found on the Canada Service website.
13. Don't overlook the Universal Child Care Benefit
The Universal Child Care Benefit, < The Universal Child Care Benefit. Refers to a $100 monthly subsidy for any child under 6 years old, regardless of family income. Remember, this amount will be taxed on the lower-income spouse.
Tax-saving tip: If you already receive the Canada Child Tax Benefit (commonly known as "milk money"), < Tax-saving tip: If you already receive the Canada Child Tax Benefit (commonly known as "milk money"), you will automatically receive the Universal Child Care Benefit. Otherwise, register at www.universalchildcare.ca.
14. Maximize your charitable donation pool
If both you and your spouse made charitable donations, < If both you and your spouse made charitable donations. Consolidate the charitable donation amounts and report them under one person, as donations below $200 only receive a 24% tax credit (considering provincial tax benefits); while those above $200 receive a 46% tax credit (considering provincial tax benefits).
Tax-saving tip: Charitable donations made in 2009, < Tax-saving tip: Charitable donations made in 2009. Can be claimed in any of the next five years.
15. Tax benefits for caring for relatives
If you cared for elderly, frail, or sick parents, grandparents, or other disabled persons in the past year, < If you cared for elderly, frail, or sick parents, grandparents, or other disabled persons in the past year. As long as the disabled person is over 18 years old, you can receive tax benefits for caring for relatives.
Tax-saving tip: You can claim if your family's net income is below $18,081, < Tax-saving tip: You can claim if your family's net income is below $18,081. The tax credit amount is $614; if your family's net income is between $13,986 and $18,081, the tax credit will be reduced accordingly.
16. Tax benefits for using public transportation
If you or a family member used public transportation in the past year, < If you or a family member used public transportation in the past year. Be sure to keep these receipts. All receipts for children under 19 years old and both spouses can be aggregated under one spouse to increase the tax credit amount.
Tax-saving tip: Public transportation usage, < Tax-saving tip: Public transportation usage. Must be continuous for at least one month.
17. Maximize your investment losses
You can fully utilize any capital losses from any year, < You can fully utilize any capital losses from any year. To reduce future investment gains. For instance, if last year you bought $100 worth of stock, and by the end of this year, it's only worth $90, selling it generates a $10 capital loss.
Tax-saving tip: Many investors don't understand or track investment losses. In fact, < Tax-saving tip: Many investors don't understand or track investment losses. In fact. Reporting investment losses on your annual tax return allows you to indefinitely offset future investment gains, and you can also retroactively apply it to the previous three years.
18. Don't forget children's fitness expenses
The tax credit for children's fitness expenses began with the 2007 tax season. For children under 16 years old, < The tax credit for children's fitness expenses began with the 2007 tax season. For children under 16 years old. Keep receipts for ballet, swimming, or other fitness activities.
Tax-saving tip: An annual $500 fitness tax credit, < Tax-saving tip: An annual $500 fitness tax credit. Will help offset the costs of these early-morning exercisers.
19. Smart investing for tax efficiency
If you have investments both inside and outside an RRSP (Registered Retirement Savings Plan), you can optimize your investment portfolio for tax planning, < If you have investments both inside and outside an RRSP (Registered Retirement Savings Plan), you can optimize your investment portfolio for tax planning. Because capital gains enjoy tax benefits (only half of income tax is paid), whereas interest-paying bonds and GICs do not have such advantages.
Tax-saving tip: As a generally applicable rule of thumb, < Tax-saving tip: As a generally applicable rule of thumb. For conservative investors, placing bonds and GICs inside the RRSP can achieve tax efficiency.
20. Designate the lower-income spouse as the investor
If both you and your spouse earn salary income, < If both you and your spouse earn salary income. And one is in a higher marginal tax bracket. For this family, the wise choice is for the higher-income spouse to pay all or most of the family expenses, while the lower-income spouse uses all or most of their savings for investment.
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