New Year Tax Strategies
Now that the new year has arrived, there are only about four months before the deadline for filing taxes passes. This means that you have very few options for lowering your tax bill. The best of these options is making charitable contributions to approved charities.
However, making charitable contributions is not the only way to reduce your tax bill. The following are some strategies provided by TurboTax Canada for reducing your tax incidence.
1) Contribute to your RRSP (Registered Retirement Savings Plan).
If you have not yet maxed-out on your contribution limit, you can get a tax deduction for every dollar you save in your RRSP. This is one of the most effective ways of lowering your taxes.
2) Save through a TFSA (Tax-Free Savings Accounts).
Saving through TFSAs is recommended because the interest earned is tax exempt. When you start withdrawing your funds, you will not be required to pay any tax. The Canada Revenue Agency has set $5,500 as the limit for annual TFSA contributions.
3) Donate to charities.
Any donation to charities or organizations that have CRA’s seal of approval is tax deductible. Up to 75% of your net income can be donated to charities.
4) Sign up your kids in artistic or physical activity programs.
This will enable you to take advantage of the Children’s Arts and Children’s Fitness tax credits. You can claim up to $500 tax deduction per child for both of these programs.
5) Hire a member of the family in your business
Employee income is tax deductible, so hiring a member of the family in your business will help to ensure that less money goes out of the family circle.