Tax planning strategies and techniques
Income splitting is one of the tax planning techniques commonly used. It is designed to shift income from a family member in a high tax bracket to another in a low tax bracket to reduce the overall tax paid by the whole family.
There are many incentives in the tax law, which allow you to lower taxable income and increase your deductions. Substantial tax saving can be achieved if you are aware of the incentives and take full advantage of them.
Income from different investment sources is taxed differently. You can achieve tax savings if you carefully select your investment vehicles. It is more tax effective to have investment income that is eligible for full or partial exemption.
It is also a good planning technique to find ways to delay tax payments, for example, deferring recognition of income. There are some other planning strategies such as transferring income from a high-tax-rate year to a lower-tax-rate year, or shift deductions from a low-tax-rate year to a high-tax-rate year.
Tax planning and tax evasion
There’s a big difference between tax planning and tax evasion. Tax evasion is an attempt to reduce tax by making false statements about income or deduction. It is illegal. One who involves in tax evasion may face interest, penalties, or even criminal charges.
Get started early
Tax planning is a year-round activity. It is most effective if you start it early. Don’t wait until you are filing the tax return, at that moment, the opportunities for reducing your tax bill become very limited.
Basics of Tax-Free Savings Account (TFSA)
Benefits of Registered Education Savings Plan (RESP)
Basics of registered retirement savings plan (RRSP)
