There is no better time than at the start of the year to take actions that will minimize your tax bill. Here is a few ideas to consider:
Maximize contributions to your Registered Retirement Savings Plan (RRSP):
The contribution cap for 2009 is $21,000. And don’t forget, you still have until March 2 to max out your 2008 contribution room of $20,000. The sooner you contribute, the sooner the money starts growing tax-free until you start to withdraw. Consider adding contributions to the usual monthly household payments you make. In return for your contributions you get a tax credit.
Split pension income:
If you received "eligible" pension income last year, it might be worthwhile to split as much as half of it with your spouse or common law partner to lower your taxes. If you are age 65 years or older, eligible money includes:
1. Income from a Registered Pension Plan (RPP);
2. Annuities from a Registered Retirement Savings Plan (RRSP);
3. Payments from a Registered Retirement Income Fund (RRIF), and
4. The taxable portion of annuities from a superannuation or pension fund or plan.
For individuals under the age of 65, qualifying income comprises money from pension plans and superannuation plans, including foreign pensions.
Split taxable income:
You will pay less tax if you make less money, so if you can transfer income to a lower income spouse, common law partner or child your taxable earnings decline. However, the lower income individual must actually perform job-related duties, you must keep employment records, and you must pay a wage or salary commensurate with what you would pay anyone to do the same job. An additional benefit of this strategy is that a hired spouse will be contributing to the Canada Pension Plan (CPP) and be able to contribute to an RRSP.
These are just a few tax saving ideas. There are many more that you may benefit from as a tax payer. Contact us this tax season and ensure you get the tax credits you are entitled.