Am I Maximizing all Available Tax Deductions for my Family? - Kerr Financial
Accounting & Tax
Am I Maximizing all Available Tax Deductions for my Family?
Category: Accounting & Tax, Financial Planning Tags: CRA, Credits, Deductions, Tax

In Canada if your income exceeds $200,000 you have graduated to the highest federal tax bracket. Congratulations! In many provinces this brings your marginal tax rate close to or over 50%. That means for every dollar earned in excess of $200,000 you will be paying a substantial portion to the Canada Revenue Agency. With this in mind it is important to ensure that you are minimizing your family’s personal tax bill.

How can your family reduce their taxes? It can be as simple as stepping back and thinking about which credits, and deductions may be applicable to you.

Do I have employment income? Did I incur any significant medical expenses this year? Did I relocate for employment? Did I contribute to my RRSP? Did I have any investment income? Did I donate to charity? Did I get tuition credits? Did I buy a house this year? Are my spouse and I in significantly different tax brackets? Do I use public transit? Am I maximizing my deductions from self-employment income?

All of these questions can pin point additional tax savings for your family. Below we have outlined some commonly missed deductions and planning opportunities which can save your family money come tax time.

7 Ways to Maximize your Deductions
  1. Does your insurance company only pay for a portion of your medical expenses? If so the part that you pay out of pocket is likely tax-deductible. Examples of frequently missed medical expenses are prescription eye glasses & contacts, prescriptions not reimbursed, and employee paid premiums to a private health services plan.
  2. Are you taking public transit to work? This can be a tax deductible expense. To be eligible you need to demonstrate that your transit pass meets the criteria set out by the CRA.
  3. Did you contribute to your RRSP? You may want to think about using the deduction in the current year or deferring it to higher income years. If you direct the refund from your deduction contribution to your TFSA this could be a great form of forced savings. On the other hand, deferring the deduction to higher tax years may also be a good strategy for you.
  4. If I am self-employed am I keeping proper track of my expenses? As a self-employed individual you are eligible to write-off many of your business expenses. Often times additional tax dollars are paid as a result of poor record keeping. Start a system this year to organize your business receipts making it easier and more efficient come tax time.
  5. Would a spousal loan strategy help? If you and your spouse are in vastly different tax brackets this strategy could benefit you depending on your level of investment assets. With a spousal loan any income earned on the loan would be taxed in the hands of the lower income spouse.
  6. Does an inter-vivos trust make sense for my family? At a certain level of assets an inter-vivos trust could provide your family tax savings. This is done by allocating income out to beneficiaries who are in a lower tax bracket. Inter-vivos trusts are especially useful to fund a child’s education once the RESP has been maximized.
  7. Could an IPP benefit you? For individuals over 40 with their own businesses, consider setting up an individual pension plan could offer pre-tax business savings, higher contribution room for individuals vs RRSP’s, not to mention the deductibility of fees and set-up costs.

Tax legislation evolves in our dynamic political environment, and eligible deductions and credits are subject to change. A qualified tax professional can help you identify which are applicable to you and also provide guidance and planning suggestions to make the most of the strategies available to reduce your future tax bill. By paying fewer taxes, your family will benefit from having more money to achieve their financial goals.


Kerr Financial

About Kerr

Kerr Financial Group was formed in 1979 for the purpose of assisting individuals to maximize their personal financial resources, alleviate their financial and retirement concerns and simplify the administration of their affairs.

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