Legit ways to save more on your taxes in Canada
Taxes are always hated by one and all. Still, it is unavoidable. We all have to pay some amount of tax but, there are ways to reduce the burden. Income taxes in Canada are charged like most other places in the world. It means if you earn something, then you have to pay some taxes that are subject to limits and relaxations.
The Tax Law Canada does have some provisions and opportunities that you may take to reduce your tax burden. In the following parts of this article, we shall look into the different ways in which you can reduce your income tax burden in Canada.
Apply for a loan
You will agree that procuring loans or credits, is way too common nowadays; and this debt can be a great tool for saving tax. If you are thinking that the loan you took for buying a car, or the loan amount on your credit card can help you save tax, then you are wrong. You have to use debt for investment because the interest on the debt you use for investment is tax-deductible. So it is better to use your savings for making most of your purchases. You should get loans for investment purposes.
Utilize your RRSP
You can take advantage of your RRSP (Registered Retirement Savings Plan) and extract the maximum out of it. You can borrow for investment purposes and try to max it out but do remember to plan well so that you can service the loan in a period that is reasonable and possible by you easily.
Upgrade your investment portfolio
Your portfolio of investment also affects the amount of tax you can save. It holds for any fixed-income investment. Generally, stocks provided preferential taxing on dividends and capital gains income. So, if your portfolio has more fixed-income investments, then you may be saving lesser taxes.
Split your earnings
Splitting income between spouses is a good way to save taxes. But they need the assistance of professionals to be able to clear an audit. You can take out some money from either of your accounts and contribute it to the retirement account of the other to save tax. It works well if there is a considerable difference in the earnings.
A side hustle
Starting a side business is also an effective way to reduce some of your tax burdens. Various business-related expenses like the usage of your car for business or the salaries that you are paying out, or the expenses regarding the operations of your home office can be deducted from your income. One thing that you should remember is that, you should not start a business just to reduce your tax burden. It can negatively impact you if your business starts making losses. Some industries like farming don’t generally earn enough money to get the required tax benefits.
Alistair Vigier, the CEO of Clearway Law, said that the best way to save more taxes is to hire a professional tax accountant who can look into your finances. They can recommend the best options for you so that you can maximize your tax savings.
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