Hardly everyone enjoys paying taxes. However, there are many legal ways you can minimise your taxes. Here are some quick ways you can minimise your tax bill before it is time to file your next return.
These are some easy ways that will help you reduce your tax bill but at the same time, help you elevate your business and social profile.
Consider Tax-loss selling, which is essentially selling-off investments with accrued losses to offset capital gains realised from other assets. You have to do this before the year ends ideally and there is a prescribed yearly last working day.
Tax selling refers to a type of sale in which an investor sells an asset with a capital loss to lower or eliminate the capital gain realised by other investments, for income tax purposes. Tax selling allows the investor to avoid paying capital gains tax on recently sold or appreciated assets
Making charitable donations
This is one of the most feel-good ways to minimise your tax bill.
According to experts, both the federal and provincial governments offer donations tax credits that, in combination, can result in tax savings of up to 54 per cent of the value of your gift in 2018. With total cash donations up to $200 in a year, the federal donation credit is 15 per cent of the donation amount. For total donations exceeding $200 in a year, the federal donation credit jumps to 29 per cent (33 per cent where taxable income exceeds $205,842) of the donation amount. Provincial donation credits are also available.
The last day of the year is usually the cut-off period for tax receipts for making charitable donations and donations after that typically go into next year’s tax savings.
Gifting publicly traded securities, as well as mutual funds, with accrued capital gains to a registered charity or a foundation, including a donor-advised fund, not only entitles you to a tax receipt for the fair market value of the security or fund being donated. It eliminates capital gains tax as well, experts said.
If you can pay your family medical expenses before the last day of the year, you can claim a medical expense tax credit.
Home renovations that deal with accessibility
This is specifically for seniors and people with disabilities. Home renovations that help with accessibility can be eligible for the disability tax credit.
According to experts, the tax credit is equal to 15 per cent of up to $10,000 of expenses per year towards renovations that permit these individuals to gain access to, or to be more mobile or functional within their home, or reduce their risk of harm within their home or from entering their home.
Expenses that qualify for this tax cut include wheelchair ramps and any other renovations that make accessing a home more accessible.
Interest on student loans can be claimed as a tax cut. While only the student can claim the student loan interest credit, the interest on the student loan can be paid by the student’s parents.
Student RESP withdrawals
A Registered Education Savings Plan, or RESP, is an investment vehicle available to parents in Canada to save for their children’s post-secondary education. The principal advantages of RESPs are the access they provide to the Canada Education Savings Grant (CESG) and a method of generating tax-deferred income.
Although the amount of the Educational Assistance Payments will be included in the income of the student, if the student has sufficient personal tax credits, including the basic personal amount and the non-refundable tuition tax credit, the EAP income will be, effectively, tax-free, experts said.