Simple Strategies to lower your tax liability

18 March, 2014

Excited because it is March and it is tax time?  Thrilled to get your receipts ready, calculator out, and grab the Canadian Tax Act to start the exciting.  The rules are constantly changing, tightening, lightening and being compounded by other articles on seemingly unrelated forms. That is where a tax accountant can help you clear the muddy waters.  Here are six quick tips that you may not be thinking of when doing your taxes:

  1.  First Time Donor Super  Credit:  This is a brand new non-refundable tax credit that greatly increases the tax break for making donations to qualified charities.  This is a tax credit that increase the normal tax break by charitable donations by 25% of the first $1,000 donated for qualified individuals.  A professional tax accountant can help you navigate this new tax credits, and many others, so that you can pay the least legal amount of taxes.
  2.   Max Out Your RRSP and/or TFSA – People rarely pay themselves first.  RRSP can be a great way to make sure you pay yourself while lowering your current tax liability.  Alternatively a TFSA is often an overlooked, and relatively new, investment vehicle allowed by the Government.  Although the TFSA does not give the same immediate tax advantage as an RRSP, the tax benefits it can provide over time often can be far better than an RRSP. A tax expert can help you decide if which is right for you and can help you look at some solutions to help you maximize your long term tax planning.
  3. Taxes and Investments – Some investments – such as stocks – enjoy preferential tax breaks on dividends and capital gains, whereas other fixed-income investments don’t. Depending on your tax bill and the rate of inflation, holding your money in fixed-income investments that are exposed to tax may actually cost you money. Confused?  Don’t worry, a professional tax accountant can answer these complex questions.
  4. Start a Business – Owning a business may allow you to write off your car, gas, home office, electricity, and other every day expenses. The advantage of certain tax deductions is a logical opportunity, but ensuring that you are running a profitable side business is another discussion.  Don’t open a business for the deductions, open it to make money first and foremost. Working with a professional accountant you can strike the right balance.
  5. The detail are extremely important – Keeping track of what write-offs, deductions, and other expenses apply to your situation can be difficult. Deductions are not as simple as putting it on the form, it is important to also make sure you have the adequate support for your tax deductions. 

For most people, finding the right professional accountant is the most important step to reducing your taxes. All of the above strategies are legal, but your accountant will be able to look at your finances and tell you which ones are viable.  Contact your local Mississauga Accountants at Numbers Plus to help you develop your tax strategy.  Contact us today.

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