3 Great Strategies for Canadians to Save Income Tax
Canadians pay up to 15% to 33% federal income tax, losing up to millions in tax payment over a lifetime. Let’s face it; we’ve all dreamt about a tax-free world. Even though taxes are considered a financial burden, you can reduce this cost with strategic tax planning. We’ve listed down some ways Canadians can save their income tax:
1.Claim Your Medical Expenses
Filing a return for your annually medical expenses is r great way to gain tax credit. If you’ve paid for any healthcare expenses, such as medical supplies and dental care, you’ll be able to claim them on your income tax and gain a return, even if you didn’t pay for it in Canada. You’ll need to gather all your medical receipts to claim on line 33099 or line 33199 of your tax return under Step 5 – Federal tax. However, you should keep in mind that not all medical expenses will qualify, and there’s a cap on the amount you can claim. This ‘threshold’ is either 3% of your net income or $2352 (the lesser amount is chosen). You can maximize this amount by combining your spouse and children’s medical expenses into a single tax return.
2.Tax-Free Saving Plan
One of the simplest ways to save income tax is to make a yearly contribution to your RRSP (Registered Retirement Savings Plan). This tax-advantaged saving plan allows you to protect your savings from tax deductions. It’s a smart idea to pay RRSP to the maximum amount, but it shouldn’t exceed the limit, as you’ll be subjected to a 1% monthly penalty. Another smart option is to open a Tax-Free Savings Account (TFSA). This account will allow you to withdraw money without incurring any penalties.
3.Start a Business
Starting a new business might seem daunting and expensive, but you’ll be glad to know that the IRS provides a tax break. This allows you to deduct up to $5,000 of your startup costs during the first business year. By deducting tax-related expenses, your net income will also increase in the process. Some examples of businesses are maintaining an office home and then filing a claim for the expenditure. You can even have your friends and relatives employed in this business.
Professional Tax Advisory Services
Tax consultants will help you find ways to increase your tax returns and help save income tax. Faber LLP is a leading accounting firm in Edmonton, Alberta. We’ve been in the industry for over 20 years and have worked with several clients, providing excellent tax advisory, consultancy and accounting services in Edmonton. Our team will work with you every step of the way to derive a suitable method to save income tax.
Get in touch with our experts today at 780-432-5262, and book an appointment.