Tax Planning
What is tax planning?
Tax planning is the process of ensuring that all aspects of your financial plan work together in such a way that they reduce your overall tax bill as much as is legally possible. Minimizing your taxes allows you to grow your investments faster.
Why is tax planning important?
Tax planning impacts your entire financial plan
Tax management plays a crucial role in every comprehensive financial plan and should be a consideration for every aspect within it.
You could save money by paying less tax
Tax planning strategies can reduce your tax obligations, including on capital gains and investment withdrawals.
You could reduce liabilities and protect your assets
Good tax management can lessen an estate’s tax liabilities, as well as ensure you keep more of your investment growth.
Strategies to minimize tax
Common Questions Answered
Minimizing the amount of tax you pay means you keep more of your income and investment growth. This will help you meet your goals faster: from paying off debt to saving for retirement or your kids’ education.
You can reduce your tax bill considerably by taking advantage of all the tax deductions and tax credits that you’re entitled to.
Federal tax deductions include:
- RRSP contributions
- Spousal support payments
- Deductible interest charges on loans used to earn income from a business or property
- Union and professional dues
- Contributions to a company pension plan
- Some moving expenses
- Expenses related to self-employment
- Child-care expenses
Federal non-refundable tax credits include:
- Medical expenses (for example, you could pool your family medical expenses on the lower income spouse’s tax return)
- Charitable donations (for example, you could pool the donations you and your spouse made in the year, or carry them forward up to five years)
All individuals and organizations that pay tax can benefit from tax planning. Many tax credits and government assistance programs are calculated based on net income on tax returns. Using tax strategies can help ensure you maximize these benefits and credits, such as by making RRSP and TFSA contributions, so your taxable investment income is lower.