Super Year-end Tax Tips
- Posted by Sanjeev Kamra
- On December 4, 2010
- 0 Comments
When it comes to saving money on taxes, small changes yield big results. By doing a lot of little things, you’ll be able to keep more for yourself rather than pay more than you need to in taxes.
Here are some strategies to help reduce or defer your tax hit:
Use capital losses to offset capital gains
It may be time to sell off any investments that haven’t done well. By selling them at a loss, you could offset any capital gain taxes owing from investments that have done well. Rather than thinking of this as giving up, consider it as changing a losing game that not only results in immediate tax savings, but also frees up capital for other investment opportunities.
Expert tip: Remember to keep in mind the superficial loss rule — Canada Revenue Agency’s (CRA) way of discouraging investors from selling securities for a loss only to buy them back within 30 calendar days.
Make your charitable donations
In the spirit of holiday giving, this is a great time of year to support your favourite cause. You will also gain a tax credit.
Donations can be pooled together as a family and claimed by one spouse — or you can hold onto them for a period of five years. Combining them will result in a higher credit.
You can also gift publicly traded securities (including stocks, bonds, mutual funds and segregated funds) that have appreciated in value. Since capital gains taxes do not apply on the eligible amount of publicly traded securities donated to registered charities, you’ll get the tax credit, but you won’t have to pay the tax on the capital gains.
Contribute to an RESP
A Registered Education Savings Plan (RESP) is an excellent way to save for your child’s education default on a student loan and receive the Canada Education Savings Grant and any provincial education savings plans that are applicable.
Take advantage of the Children’s Fitness Tax Credit
Your kids’ fitness programs are beneficial to them — and to your tax bill. “This federal, non-refundable tax credit has a maximum allowable expense of $500 for children under the age of 16. It’s intended to encourage kids and youth to be more active — which is always a good thing. If you haven’t used up your limit, consider signing them up for a qualifying physical activity after school, on weekends or over the holiday break.
Review your 2009 notice of assessment
Your notice will give you information on your 2010 contribution room for your Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA). Saving for payday loan lenders should be one of your financial priorities. While you have the first 60 days of 2011 to make contributions that can be claimed on your 2010 return, knowing your amounts will help you maximize contributions and give you time to decide if an RRSP loan is worth your while.
Other claims to consider
There are also other claims you can make for the 2010 tax year that can save you money. Start gathering your receipts now and you’ll save yourself from the annual April tax panic! For example:
1. Moving expenses — if you’re eligible
2. Public transit passes
3. Fees associated with investment management
4. Interest paid on borrowed funds to invest in non-registered accounts
5. Safety-deposit box fee
You can find more information on what you can and can’t claim on my blog Save $$$$: Tax write offs for small business .
Advice for families: Divide, deduct and defer
Don’t think of yourself in isolation; rather, think of yourself as a family unit and how you can maximize your tax savings as a unit. Look for ways to divide, deduct and defer income taxes.
According to our expert, in most cases, the higher-income earner should claim all expenses. On the other hand, the lower-income earner should do the investing, as they will be charged at a lower tax rate for any gains.
Why getting a refund can be a bad strategy
If you’ve been getting a tax refund, it may be time to rethink your strategy. Getting a tax refund shouldn’t be seen as a forced savings tactic. If you regularly contribute to an RRSP, rather than waiting for the refund upon tax filing, consider applying to the CRA to reduce the income tax deducted by your employer on your paycheque — so that you can make better use of your money throughout the year.
If you need more info; Call 905-216-2445, or click info@vnaccountingsolutions.com or visit vnaccountingsolutions.com/
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