Tax Planning Tips
You will find a lot of articles providing you with tax tips during this time of year. As we approach the end of tax season, this article offers you the following tax planning tips.
Tip #1: Open a TFSA. The new tax-free savings account, launched January 1st, is the ideal place to put up to $5,000 of savings and earn tax-free income and/or gains. Any withdrawals are not taxed, do not negatively affect eligibility for government-tested benefits and can be re-contributed the following calendar year.
Tip #2: Maximize your RRSP contributions. The RRSP limit for 2009 is the lesser of 18% of 2008 earned income or $21,000. Get a head start on your 2009 contribution today by making regular monthly contributions.
Tip #3: Set up a spousal RRSP. The primary benefit of a spousal RRSP is that funds withdrawn can generally be taxed in the hands of the lower-income earning spouse.
Tip #4: Earn tax-efficient investment income. For those who have maximized their RRSP and TFSA contributions, consider tax-efficient investment income outside of these tax-sheltered plans by investing in Canadian dividends, which are eligible for the dividend tax credit, and capital gains, which are only half-taxable.
Tip #5: Open up RESPs for your kids. Don't forget to make at least $2,500 of contributions to each child's registered education savings plan (RESP) this year to take advantage of the $500 Canada Education Savings Grant (CESG). You may also be able to catch up on missed CESG's from prior years.
Tip #6: Investigate pension splitting. If you've received pension income, be sure to investigate whether splitting up to half of that income with your spouse or partner makes sense when you file your tax return.
Tip # 7: Consider income splitting. A spousal income-splitting strategy whereby the higher-income spouse or partner loans funds to the lower-income spouse or partner to invest may be ideal given the record low prescribed rate, which is set at 2% this quarter.
Tip # 8: Donate "in kind" to charity. When planning your charitable giving for 2009, consider donating appreciated securities directly to your charity of choice and eliminating all tax on any accrued capital gains.
Tip # 9: Plan now to avoid a tax refund. If you regularly get a large tax refund each spring, consider applying for a reduction of tax at source using CRA Form T1213. This needs to be repeated each year.
Tip # 10: Consider opening an RDSP for a disabled person. If you or someone you care about has a disability, consider opening up a registered disability savings plan. Contributions to RDSPs, limited to $200,000 over the disabled beneficiary's lifetime, may be augmented by up to $90,000 in Canada Disability Savings Grants and Bonds.
If you would like to setup a confidential appointment to review any of the above tax planning tips, please contact our office
Tip #1: Open a TFSA. The new tax-free savings account, launched January 1st, is the ideal place to put up to $5,000 of savings and earn tax-free income and/or gains. Any withdrawals are not taxed, do not negatively affect eligibility for government-tested benefits and can be re-contributed the following calendar year.
Tip #2: Maximize your RRSP contributions. The RRSP limit for 2009 is the lesser of 18% of 2008 earned income or $21,000. Get a head start on your 2009 contribution today by making regular monthly contributions.
Tip #3: Set up a spousal RRSP. The primary benefit of a spousal RRSP is that funds withdrawn can generally be taxed in the hands of the lower-income earning spouse.
Tip #4: Earn tax-efficient investment income. For those who have maximized their RRSP and TFSA contributions, consider tax-efficient investment income outside of these tax-sheltered plans by investing in Canadian dividends, which are eligible for the dividend tax credit, and capital gains, which are only half-taxable.
Tip #5: Open up RESPs for your kids. Don't forget to make at least $2,500 of contributions to each child's registered education savings plan (RESP) this year to take advantage of the $500 Canada Education Savings Grant (CESG). You may also be able to catch up on missed CESG's from prior years.
Tip #6: Investigate pension splitting. If you've received pension income, be sure to investigate whether splitting up to half of that income with your spouse or partner makes sense when you file your tax return.
Tip # 7: Consider income splitting. A spousal income-splitting strategy whereby the higher-income spouse or partner loans funds to the lower-income spouse or partner to invest may be ideal given the record low prescribed rate, which is set at 2% this quarter.
Tip # 8: Donate "in kind" to charity. When planning your charitable giving for 2009, consider donating appreciated securities directly to your charity of choice and eliminating all tax on any accrued capital gains.
Tip # 9: Plan now to avoid a tax refund. If you regularly get a large tax refund each spring, consider applying for a reduction of tax at source using CRA Form T1213. This needs to be repeated each year.
Tip # 10: Consider opening an RDSP for a disabled person. If you or someone you care about has a disability, consider opening up a registered disability savings plan. Contributions to RDSPs, limited to $200,000 over the disabled beneficiary's lifetime, may be augmented by up to $90,000 in Canada Disability Savings Grants and Bonds.
If you would like to setup a confidential appointment to review any of the above tax planning tips, please contact our office
Paul Clark - CFP
Wealth Management Specialist
(705) 748-5181
paulclark@protectorsgroup.com
paulclark@protectorsgroup.com
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