Shocked by how much tax you paid this year? Here are a few strategies to consider to reduce your families tax bill next year.
Do you make large regular annual donations?
If yes, you may be able to make the same donation but at a lower after-tax cost. There are a number of investment firms in Canada that specialize in leveraging the properties of flow through resource deductions to structure products that facilitate donations for a net after tax cost of as little as 20% of the donation. Fore example, if you regularly give $50,000 to the Canadian Opera Company, you may be able to make the same donation for a total after tax cost of as little as $10,000. Contrast this to traditional donations where the after-tax cost of a similar donation is closer to $25,000.
Do you work from home?
If you regularly work from home, you may be able to claim certain home office expenses. To qualify, your employer must require that you maintain a home office as part of your employment contract, and must not otherwise reimburse you for expenses. The home office space should also be where you complete more than 50% of your work. Lastly, you’ll need to complete and have your employer sign, Form T2200, Declaration of Conditions of Employment.
Are your investments optimized for tax purposes?
Today, everyone is worried about fees but many are unaware of investment return leakage where your portfolios is not tax optimized.
First, maximize contributions to RRSPs, TFSAs, RESPs, and RDSPs and take advantage of spousal RRSPs as a way of maximizing the higher income earning spouses larger tax deduction.
Second, be mindful of holding foreign stocks in your registered accounts. Foreign taxes paid in registered accounts are an additional cost that can’t be claimed as a foreign tax credit on your personal tax return.
Finally keep in mind capital gains and dividends are taxed more favourably than interest income. Take this into account in determining which investments to hold in registered versus non-registered accounts.
Now is the time to put into place the strategies to help you get there. Speak with your advisor today.
