Everyone hates taxes, doesn`t they? It doesn`t matter if you`re rich or poor, barely make ends meet, or make a lot of money, the CRA will come for your share of your income. If you are a business owner in Canada, one of the best ways to achieve higher profitability is to effectively manage your business taxes. As a business owner, one of the most important aspects of running your business is making sure your taxes are reported and paid on time to avoid penalties or other legal actions. However, there are several ways for business owners to legally optimize their tax payments in order to reduce taxes and keep the funds in the business. Here are some strategies that can be used to reduce taxable income and ultimately save taxes for your business in Canada. When it comes to saving their taxes, sometimes the wealthiest Canadians seem to have all the answers. Most tax credits and deductions apply to you, your spouse or your life partner. This allows couples to coordinate and reduce taxes for those who benefit most from tax credits or deductions. Summary: Donations are a non-refundable tax credit and can reduce your tax bill. If you are unable to contribute to your registered pension plan, you can contribute to your spouse`s or partner`s RRSP until the year they turn 71.
Keep in mind, however, that this will reduce your RRSP deduction limits for the tax year. This can allow you and your spouse or loved one to split income from RRSP contributions in retirement. Depending on your income brackets, this can result in lower income taxes. If you want to learn how to reduce taxes in Canada, consider income splitting, which is the separation of personal and business accounts. Plus, your business expenses will show up on your business card, which can help you qualify for deductions. Although paying business expenses with personal finance can put you in hot water with the CRA. While there are many (legal) ways to reduce your taxes, Dale Barrett, a Toronto-based tax lawyer at Barrett Tax Law, said the ones available to the average taxpayer depend on how much money they work and their employment status. We have come to the end of our discussion. Keep in mind that it doesn`t take much to learn how to pay less tax in Canada. All you have to do is keep complete records, file your taxes on time, and claim all the deductions available to you. Geoff Chen, HNWI planner at TD Wealth, says the country not only pays for the services we all use, but also uses taxes to pump our money into different areas. “Canada wants us to do certain things by offering tax incentives, and that also discourages us from doing other things by applying taxes,” he says.
He suggests that these are the tax strategies that everyone should study. When marketing your business, you can choose an external agency or freelancer to develop campaigns that strengthen your company`s brand with target customers. These advertising and marketing expenses are tax deductible. Plus, even some sales tactics you use may be eligible for a deduction. If you took a customer out to eat, you can deduct that as a legitimate business expense to save on taxes. Summary: Splitting an annuity with a spouse or civil partner can reduce your taxable income. For example, if you file your taxes with the Alberta or Ontario tax return, you can claim tax credits for donations, adoption expenses and medical expenses in addition to the claims you make in your federal income tax. Tax-Free Savings Accounts (TFSAs) are another option. Although the money you contribute to your TFSA is after-tax income, interest, dividends or capital gains earned there are tax-free for life, and you do not have to pay tax on withdrawals. The tax credit you claim in respect of your taxes payable is $100, based on medical expenses of $2,000 in 2017.
Your Tax-Free Savings Account is a tool that allows you to increase your income without having to pay tax on it. While you don`t get tax deductions for your contributions to a TFSA like a registered pension plan, you can significantly reduce your income tax if you increase your income through a tax-free savings account.