Are you looking for strategic ways to save money on your income tax?
Keep reading to find out five effective tips that you should be utilizing right now.
Contribute each year to your RRSP. RRSP contributions are tax deductible, and any income and gains earned inside a RRSP are not taxable. This allows for tax savings upon filing your personal tax return, and tax-free growth of your retirement savings. Follow this strategy and watch your RRSP portfolio grow overtime.
2. Claim your children and your Medical Expenses
You can get a tax credit upon filing your tax return for medical expenses paid in the year. Qualifying medical expenses include payments made to a medical practitioner, prescription drugs, certain medical devices, and medical premiums paid to an insurance company for medical benefits. Keep all your medical receipts, as the CRA may ask to see them in the event of an audit.
3. Be sure to take advantage of all income-splitting and pension-sharing opportunities.
Taxpayers can apply to share their Canada Pension Plan (CPP) retirement income with their partners if both are 60 or over. While pension sharing is not considered to be the same as pension income splitting, CPP pension sharing accomplishes much the same thing — putting more income into the hands of the lower-income partner. Which can help them to achieve the lower tax rate.
4. Be sure to transfer any unused credits.
A variety of tax credits can be transferred. Several credits for students — such as the tuition, education and textbook credits — can be transferred to a spouse, a parent, or even a grandparent once the credits are first used to reduce the student’s tax payable to zero.
The credits can also be carried forward indefinitely, so the student can use them later when he or she starts earning money.
5. Don't miss the tax benefit
Some low- or zero-income earners still think there's no need to file a return. This misunderstanding can cost thousands of dollars in lost benefits and credits like the GST/HST credit and the Canada Child Tax Benefit. More and more benefits are being distributed through the tax system these days. So, if no return is filed, no benefits get sent.
For some benefits, like the Guaranteed Income Supplement and the Working Income Tax Benefit, recipients need to apply every year.
Provinces also offer sales tax credits and property tax credits for low income earners. But again — no tax return, no credit.
Teenagers who earn a few thousand dollars should also consider filing. That creates RRSP room that can be carried forward indefinitely to use at a time when they will owe tax.Save Money From Salary