With the due date for Canadian taxes quickly approaching, have you ever wondered “how can I reduce my taxes?”. Read further to learn about how you can save the right way.
1. First Time Donor Super Credit
A donor can deduct 15% of donations $200 and under. For donations of $200 or more, 29% can be deducted, as long as the donation does not exceed the maximum of $1,000.
If you are a first time donor, you may be eligible for an additional 25% non-refundable credit on up to $1,000 of donations. To qualify for a first-time donor super credit, you and your spouse must not have claimed the charitable donation tax credit in any of the previous 5 tax years.
2. Accounting Fees
Another way of reducing your taxes is by deducting fees paid to your accountant for preparing your income tax return. The accounting fees paid may be deducted from investment income, rental income, or business income reported on your tax return. In all other cases, accounting fees are non-deductible.
3. Salespersons Expenses
As a salesperson, work-related expenses can be tax deductible. Expenses are deductible under the condition that they were incurred for the purpose of earning a commission income.
4. Vehicle Expenses
If you are required to use your personal vehicle for work, certain expenses can be deducted. Only the business use of your vehicle can be deducted on your income tax return.
These include (but are not limited to):
Contributions made to an RRSP are deductible from your income. The maximum amount that can be contributed in 2016 is $25,370. Any income earned inside an RRSP is tax-free. However, withdrawals from an RRSP are taxable to you.
A Tax Free Savings Account is an account in which any investment income earned is not subject to income tax. Contributions are non-deductible. Stocks, bonds, mutual funds, and high-interest savings accounts can all be held in a TFSA. The maximum annual contribution limit to a TFSA is $5,500 (as of 2016).
7. Spousal Loan
Making a spousal loan to a spouse who is in a lower income tax bracket is an excellent way to take advantage of income splitting in Canada. Your spouse can then invest the money received from the loan into a business, stocks, real estate, etc. The profit generated from these investments are taxed to your spouse who is in a lower tax bracket than you.
8. Public Transit Amount
You can claim a tax credit for amounts spent on monthly or yearly public transportation passes. Eligible passes include: buses, streetcars, subways, trains, and ferries.
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.