Get valuable income tax planning techniques for individuals and families
The main objective of income tax planning for individuals as well as families is to plan one’s finances in the most tax optimized manner. Tax planning allows the taxpayer to use various tax exemptions, deductions and benefits to minimize their tax liability. Thus it is a cumulative result of various income tax planning techniques like income splitting, Registered Retirement Savings Plan (RRSP) contributions, private pension plan etc. But all the above mentioned tax planning techniques should be considered only after consultation with our expert Toronto income tax planning lawyers.
An owner of a small business can split income with a spouse by employing the spouse in the business as a T4 employee or by having the spouse own shares of the corporation and receive dividends, although these rules are expected to change as a result of the proposed amendments announced in July 2017.. Thus Income splitting is a very effective tax planning strategy for individuals as well as families. As a valuable income tax planning strategy, RRSP contributions not only results in immediate tax savings but it also provides opportunities of income splitting with a spouse. A spousal RRSP allows one spouse to contribute to the RRSP account on behalf of the other spouse and is a good way to achieve income splitting if one spouse is in a higher tax bracket than the other. A taxpayer with a private corporation can also consider setting up a private pension plan as an effective tax planning strategy. Before proceeding with any above mentioned tax planning techniques it is advisable that you engage one of our expert Canadian tax lawyers for professional guidance.
There are some other tax planning techniques like Registered Education Savings Plan (RESP) contributions, RRSP meltdown, Tax-Free Savings Account (TFSA) contributions etc. RRSP meltdown is a complex technique to start to deregister part of the RRSP annually and offset the income inclusion by an equivalent deduction and thus it requires input from one of our experienced Toronto tax lawyers. The advantage of an RRSP is that amounts contributed are deductible from income and the profits earned in the RRSP portfolio are free of tax when earned. Contributing to a RESP is a good way to earn tax free income and save for the tuition costs of dependent children, thus it is a valuable tax planning technique for individuals as well as their children. The general arrangement of RESP is that the subscriber makes contributions to the RESP, and income earned in the account is tax free so long as the money stays in the account before distribution to the beneficiaries. TFSA is also an effective tax planning strategy where the income or capital gains earned from any investments in the TFSA are tax free at withdrawal. The result of all these tax planning techniques is to reduce the overall taxes owing by an individual. Tax planning for individuals and families is an ongoing process and thus it is advised that you consult with one of our best Toronto income tax planning lawyer before proceeding with any tax planning technique.