We all feel a sense of accomplishment when we are able to save money while filing our taxes. By using the right ethical strategies and tools, one might be able to save taxes whenever they file taxes. Before delving into the tips for tax savings during tax planning, it is crucial to comprehend the nature of tax planning and its significance.
Determining the entire Canadian taxation system is a mammoth task, best left to the professionals. Therefore, at Balance Law, we have come up with simple answers and solutions for strategic tax planning and tax savings.
What is tax planning?
Using a combination of various taxation strategies to maximize your savings and minimize your taxes is called tax planning. If you are a business owner, then an effective plan can enable you to boost investments and capital gains.
Drafting or upgrading your taxation plan as per the evolving business environment and your changing needs can enable you to get more returns in the future. One can also reach out to experienced tax advisors for a customized strategic tax plan.
Tax strategies that make your life easier
1. Income sharing with your spouse is not always bad.
One can split or share pension income with the spouse with a lower income. This will result in elevating the income of one while reducing the tax burden on the other. Following income-sharing practices can boost your combined household income after taxes.
2. Eco-Friendly Upgrades Equal Government Reimbursement
Governments across the world use different schemes to encourage the use of eco-friendly products. You can get tax benefits by living a sustainable lifestyle. For example, the Canada Greener Homes Grant is a grant that gives cash to those who lead an eco-friendly lifestyle.
3. A tax-free savings account is a boon.
If you are over the legal age, then it is best to open a tax-free savings account as soon as possible. It is one of the best tax-saving strategies for Canadians. As the name suggests, you can accumulate your savings in this account to minimize taxation. One can invest in mutual funds, stocks, bonds, etc. through this.
However, there is an amount limit you can transfer to this account yearly. So you need to be mindful of the deposits you are making in the account.
4. Retirement planning is fun.
You can minimize taxable income and secure your post-retirement life with a Registered Retirement Savings Plan (RRSP). Your taxable income will be determined after deducting the amount you have invested in a registered retirement savings plan.
This investment only reaps benefits for everyone. People withdraw this income post-retirement, and they are in a lower taxable bracket. So, one has to pay less taxes and can gain maximum benefits.
Other than the magic four strategic tax planning hacks, you can also follow these wonderful tips to lower your taxable income:
- Real-estate investment is a blessing in disguise.
- Investing in your child’s future
- Reinvesting your capital gains back in the market
- Utilize your employer’s pension scheme.
- Keep a receipt of all your charitable donations.
At Balance Law, we aim to make tax planning in Canada easier and more accessible for corporations and individuals alike. You can contact us or fill out a small form with your tax questions, and we will reach out to you in real-time and make tax planning easy for you with our exceptional tax advisory service.