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How To Reduce Income Tax In Canada?
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Always people look forward to minimize the income tax. If you are a resident of Canada, you can reduce the income tax by various methods. However, if you are a non-resident, then you need to consult a professional and find out about the non-resident taxation. You can reduce the tax when you save for your retirement years. The RRSP or the registered retirement savings plan is an easy way to save for your retirement and save the taxes as well. The TFSA is another way to reduce the income tax payment in Canada. Tax Free Savings Account or TFSA can be done by investing the money in shares, bonds, mutual funds, and this is the perfect way to save tax. When you invest in lands or properties, you are subject to real estate taxation, but when you go for this option. The profits you gain are not taxable and when you withdraw the amount you would not be taxed for the same.
You can also save or prevent from paying extra, for you pay your tax on time. Filing the tax returns on time lets you stay away from paying the penalty. If you are paying after the deadline, you would be paying 5 percent extra of the tax. You will be subjected to pay the CRA penalty. If you have kids, then you can easily cut down the tax. This is because, the children have a lower tax bracket compared with the parents. You can gift the assets to your children. When the assets grow in value, you will not be taxed more, as your children are gifted the same from you. Automobile returns are subjected to tax. If you want to reduce the same, an easy way is to claim the automobile costs. For this, your employer should state this as a requirement in the form T2200, and this should be a part of employee agreement as a prerequisite of the employee.
Investing in the properties of other countries is an easy way to secure your tax amount. Most of the times the income tax for foreign investments are little or nil. However, keep in mind if you are bringing this money to Canada the same is taxable. You can pay some amount as salary to your family members. Keep in mind that these family members should be in the lower tax bracket. Children below 18 years of age do not have to pay tax. So, you can share a part of your salary as tax to them.
When the small businesses are incorporated, then you can enjoy great tax benefits. When you go for shareholder loan repayments, you can save tax compared with that of the salary and dividends. You need to know what the tax reduction policy of Canada is. The policy is available online and you can also get the Tax Payers’ Bible from the income tax department. You can save more on income tax if you are informed in advance.
Josep Guardiola is a chartered accountant who practices as an independent non-resident tax specialist. He also author of offshore tax planning, in this article he provides real estate taxation tips. For more information you can visit Taxca.com.
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