The main objective for you regarding tax planning should be to plan your finances in the most tax-optimized manner for yourself and your family. With proper tax planning in Toronto, you can make the most of different tax exemptions, deductions, and benefits to reduce your tax liability. With various income tax planning techniques, you can save your money as an individual and your family. However, you may feel worried about the tax you have to pay in Toronto and want to reduce the burdens of payments. Do not worry! We are here to help. The following five tax planning tips can be very helpful for you to save your hard-earned money as an individual and a family man:
Tip #1: RRSPs (Registered Retirement Savings Plans) Contributions
There are two tax benefits you can get with the aid of RRSPs contributions. The first benefit is that contributors can save money on taxes based on their tax rate. Plus, the growth of RRSP is tax-deferred. RRSP types are of different types; however, you should know about individual RRSP and spousal RRSP contribution as an individual or a couple. As an individual, you should keep money in your RRSP if you want the tax to be exempted from your earned income via it. If you contribute to a spousal RRSP, you can get an immediate tax deduction with contributions owned and controlled by your spouse.
Tip #2: Canada Child Benefit (CCB) and Filing Your Income Tax Return
You can take advantage of Canada Child Benefit (CCB), which is non-taxable. You can capitalize on Canada Child Benefit, offered by CRA (Canada Revenue Agency) as a single parent or having shared custody of the child. You must file your income tax return annually with your spouse or common-law partner to claim for it. Amounts are paid to the eligible families by the CRA for children under the age of 18.
Tip #3: Income Splitting and Tax Benefit
Income splitting is also a great strategy if you or your spouse earn income higher than the other. For instance, if you earn a net income of $80,000 and your spouse earns an income of $40,000, you would need to pay more tax than your spouse. However, if you split your income with your family member (spouse) in a lower tax bracket, your family tax burden will lower once your spouse invests that money.
Tip #4: Individual Pension Plan and Tax Deduction
Individual Pension Plan (IPP) is a tax planning strategy plus retirement-saving investment for individuals to save money on taxes while contributing to the plan. However, to qualify for this plan, you need to be a shareholder or employee of an incorporated business in Toronto. With an IPP, you save taxes under pension splitting rules, creditor protection, and predictable retirement income.
Tip #5: RESP (Registered Education Savings Plan) to Evade Tax
You can open an RESP account for your child as a parent, guardian, grandparent, or relative and even as a friend. However, it would help if you capitalized on the RESP plan wisely if you want tax benefits. For instance, the money in the RESP plan grows tax-free. Money that you earn by investment is not taxed unless it is in RESP.
You can do tax planning in Toronto utilizing the different plans and techniques to save money for yourself as an individual or a family person. RRSP contributions, CCB, income splitting, IPP, and RESP, can help you in different ways to reduce or avoid your tax liability. In a nutshell, you can consult a tax advisor in Toronto to utilize the tax tips provided to you in this post in your best interests.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.