It’s never too early to start tax planning for the New Year. Done properly, tax planning has the potential to minimize tax obligations. AG Tax professionals have prepared a list of certain tax strategies for consideration by a Canadian taxpayer. With the help of a tax specialist, taxpayers can develop their own personalized tax strategy.
Canadian Tax Saving Strategies
Compensation Strategies
Canadians have the option of choosing the way they pay themselves from their company-through salary, bonus, or dividends. It is important to remember that every tax situation varies, and consulting a tax professional is the best option when determining which method of payment will best suit the business, as well as the individual.
Gift Employees
As per the Canada Revenue Agency (CRA), gifting employees through awards and other non-cash items is not taxable as long as it fulfills the arms-length requirement, and the total value of all non-cash gifts and awards to an employee is less than $500 annually. Any excess amount is subject to taxes.
Acquiring and Disposing Assets
Timing the purchase and disposal of assets makes a difference from the tax point of view. For example, purchasing an asset during the year, rather than at the beginning of the year or year-end, (provided that the asset is “available for use”), may make more sense tax-wise. We highly advise consulting a tax professional before acquiring or disposing of an asset, as this may have an effect on the potential tax liability.
Capital Losses
Utilizing capital losses from investments may reduce tax burdens. An individual may consider selling “poor performing” investments in order to realize the losses that can be used to reduce taxable income. Consult an AG Tax advisor regarding how to best utilize your capital losses.
Registered Retirement Savings Plan (RRSP)
If a taxpayer is in a higher income tax bracket, they may want to consider contributing the maximum allowed limit into an RRSP account (over contribute up to $2,000) in order to reduce taxable income as well as build up retirement savings. If a taxpayer expects an increased income in the near future which may affect the income tax bracket, the taxpayer may also consider delaying RRSP contributions until the higher income year(s).
Additional Credits and Deductions
Certain expenses, (such as medical, physical fitness, registration costs for certain activities for children, tuition fees and interest on qualifying loans and investment expenses) may be claimed as tax deductions up to a certain limit. An individual must maintain records/receipts for all these expenses as tax proofs.
Charitable Contributions
As per the Canada Revenue Agency (CRA), charitable donations over $200.00 result in tax savings at the highest marginal tax rate. If an individual and their spouse have never made a charitable contribution (or have but have never claimed it on their tax returns) they may claim the First-Time Donor’s Super Credit (FDSC) which is a one-time credit providing an additional 25% tax credit on charitable contributions up to $1,000.
By planning ahead, a taxpayer can take advantage of various tax saving options that may be available. It is best to discuss the above strategies with a tax professional, as they can provide proper guidance, and recommend additional tax strategies based on your individual tax situation.
AG Tax LLP Can Help
If you have any tax-related queries, need assistance with tax planning or filing your tax returns please contact us. Our team comprises of highly experienced tax professionals with extensive knowledge of U.S. and Canadian tax laws as well as cross-border compliance
Furthermore, as a full service accounting firm, AG Tax assures complete assistance with even your most complex tax needs.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- State Sales Tax & E-commerce Taxation
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.
