The Canadian tax system is progressive. The people who earn more, pay a higher percentage of their income in taxes. While high income earners contribute significantly, there are still legal and beneficial strategies to reduce your tax burden. Plus, keep more of your hard-earned money.
Essential Tax Planning Strategies in Canada
Before we start discussing the strategies, let’s understand how the Canadian tax system works.
What is Taxable Income? It is the total amount of income you earn throughout the year. Similarly, let’s include the deductions allowed by the Canada Revenue Agency (CRA). Therefore, taxable income includes income from employment, self-employment, investments, pensions, and capital gains.
What is a Taxable Account? A taxable account is any investment account where the earnings generated are taxes. Furthermore, there are also tax advantages accounts like RRSPs and TFSAs, which we will discuss later.
Where Do Accountancy Firms Come in?
- Analyze your financial situation and recommend personalized tax strategies.
- Ensure you claim all eligible deductions and credits.
- Help you understand the implications of different tax-saving options.
- Prepare and file your tax return accurately and efficiently.
How to Reduce Taxes for High Income Earners in Canada
1. Maximizing RRSP and TFSA Contributions
The assistance of accountancy firms on this: Accountancy firms will study your income and what you want to achieve in order to give you the best advice regarding the optimal contribution amounts for both RRSPs and TFSAs. They can ensure the limits are not exceeded and also suggest on the RRSP or TFSA investments that would yield most profits over a long period.
2. Claim Eligible Deductions
How Accountancy Firms Can Help: Accounting firms provide up-to-date advice about complicated tax rules as well as deductions made. They go through your financial records and find all possible exemptions which you may not have claimed thus helping you get maximum tax relief. Moreover, they can guide you on how to keep receipts properly to support any claims of exemptions.
3. Invest in Dividend-Paying Stocks
How Accountancy Firms Can Help: This type of firm would examine your investment portfolio so that it recommends stocks with dividends whose risk factor coincides with your financial goals. Also, they can confirm that those choices qualify for dividend tax credit for purposes of maximizing its benefit regarding taxes payable.
Common Questions About Tax Planning Strategies in Canada
● When should I start thinking about tax planning?
Ideally, tax planning should be an ongoing process, not just a last-minute scramble before the filing deadline. Regularly reviewing your financial situation and income sources throughout the year allows you to make informed decisions and maximize potential tax savings.
● What happens if I make a mistake on my tax return?
Filing errors can lead to delays in receiving your refund or even penalties from the CRA. If you’re unsure about any aspect of your tax return, consulting a tax professional is highly recommended.
● What are the consequences of not filing my taxes?
Failing to file your tax return can result in significant penalties and interest charges from the CRA. It can also affect your ability to receive government benefits and services.
Should You Get in Touch with an Income Tax Services Firm?
Filing and preparing for taxing is no easy job. It’s time you consider calling WiseWealth Accountancy Services. Our team of experts will make sure planning, preparation, and filing is all done for you. Give us a call today!
