I am a tax expert and an income tax preparer in Toronto. Most importantly, I can save you money by applying smart tax strategies that I have developed and utilized over the years.
If you’d like to reduce the taxes that you pay, carefully consider some of the smart tax strategies listed below:
Deduct income tax preparation Toronto fees
Fees paid to an accountant for income tax preparation are deductible on your personal income tax return, under the foll
- If you have investment income from stocks, bonds, mutual funds that you have reported on your personal tax return
- If you have a rental property
- If you are self employed
Therefore, make sure to hold onto your income tax return preparation receipt and you’ll be rewarded with a nice tax deduction come April 30.
If you are an employee, please see my article on tax deductions for employees for ways to reduce your taxes.
Set-up in trust accounts for children
An in trust account is simply a bank account that is opened for the purpose of saving money for your children. They’re great for depositing cash gifts that your child has received and for extra cash that you have and would like to stock away for your children.
There are some important tax considerations when opening an in trust bank account:
- If you deposit your own money into your child’s in-trust account, any investment income (ie. interest) earned on that money will be included in your taxable income. However, capital gains will not be attributed back to you. Therefore, it’s better to purchase mutual funds or stocks in your child’s in trust account, because these types of investments tend to generate capital gains.
- When you open an in trust account for your child, you must make an initial deposit. If you make the initial deposit, then you cannot be the trustee for the account. The reason being is that if you are both the initial contributor and trustee, then any income or gains realized by your child will be included in your taxable income. The easiest way to get around this is by making your spouse the trustee.
- I highly advise that you first consult an income tax expert in Toronto before opening up an in trust account for your child.
Take your bonus next year
Telling your boss to push your bonus to early next year instead of current year seems counter-intuitive, especially when that money could come in handy during the holiday season.
However, this is a great tax savings strategy, because by taking your current year bonus at the beginning of the following year, the bonus will be included in the follow year’s taxable income. In other words, you would save a lot of money in taxes as your current year’s taxable income will be reduced significantly.
Withdraw money from your RRSP when you have little or no income
It’s not advisable to withdraw money from your RRSP because you are reducing your retirement nest-egg, and because RRSP withdrawals are included in your taxable income in the year that they are withdrawn.
However, if you are forced to withdraw money from your RRSP because of financial hardship or other reasons, it’s better to do so in a year where you have small or no income. That way, you will pay less in taxes as your income tax rate will be much lower.
“Timing the withdrawal of your RRSP’s can make a huge difference in the taxes that you pay,” says Expert in Income Tax Preparation in Toronto.
Become an independent contractor and not an employee
Independent contractors have far more tax benefits and tax write-off’s than employees, because as an independent contractor you are considered to be self-employed. As a self employed person, you can deduct expenses such as:
- Your home office expenses
- Car expenses
- Meals and entertainment
- Computer and equipment
- Telephone and internet
- Other business related expenses
Additionally, self employed persons don’t have payroll taxes deducted from their paycheques, which is another big tax advantage over employeed.
Changing your status from employee to independent contractor involves more that modifying your contract with your employer. To be identified as an independent contractor by the Canada Revenue Agency for tax purposes, you must:
- Be able to exercise control over the work that your perform (e.g. where and when)
- Have ownership of the tools required to do your work (e.g. laptop, telephone, etc.)
- Take on financial risk
- Have an opportunity for profit
As this is a complex area of tax, you should certainly consult with an expert in income tax preparation Toronto.
For more information on saving taxes for the self employed, please see How to save taxes for self employed in Canada If you want to learn about additional ways to save on taxes, you can check my other blog posts in addition to this article by CBC
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.