5 tips for saving on taxes in Canada

November 6, 2015

Saving on taxes takes a little planning ahead and knowledge of what you can safely deduct. With the following tips, you can save some money this tax season.

5 tips for saving on taxes in Canada

1. Invest in your RRSP and TFSA

  • Make regular contributions to the Registered Retirement Savings Plan (RRSP). All investment income earned from this account is only taxed once you withdraw your money.
  • The Tax-Free Savings Account (TFSA) is also something you should contribute to, as you won't have to pay tax on any income earned from this account.

Both of these accounts are important for not only saving on your taxes, but also for your retirement.

2. Deductions

There are a number of tax deductions available for a broad range of personal activities and business costs.

  • If your child plays sports, there is the Children's Fitness Tax Credit, which enables you to deduct sports registration fees and equipment.
  • If you're a business owner, you can deduct vehicle and gas costs, office supplies, any home office expenses and phone bills.

For all deductions, you'll want to save receipts and bills for every expense.

3. Employees also get plenty of tax benefits

If you're an employee, a number of perks and benefits are actually tax free.

  • If your employer pays for your moving costs, educational benefits, psychological counselling, up to $10,000 in death benefits and daycare services, you will likely not have to pay taxes on those benefits.
  • Ask about regular employer-paid contributions to your RRSP account due to the tax benefits associated with your pension account.

4. Time your stock sales

Timing your stock sales correctly can help you minimize your tax burden.

  • You might wait to sell stocks that are performing poorly in the hopes that they eventually recover, but you can also write them off as a loss and save money on capital gains taxes.
  • The losses can be transferred to tax bills for up to three years, so you can save these capital losses for a more opportune time.

5. Split your income

If you've retired, splitting your pension income with a spouse or partner can help you save a lot of money.

  • You're eligible to split 50 per cent of your income, allowing you to pay substantially less on your income tax if your spouse is in a lower tax bracket.
  • This could raise your spouse into a higher tax bracket, so do the math before making the decision.

Keep good records, file on time, check your deductions and make smart investments for the best results come tax time.

While there are other methods for saving on your taxes depending on your specific circumstances, following a few of these tips should get you started on substantial savings.

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