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Tax Consulting.
Tax Planning
No matter how much or how little financial planning you do, one of the biggest hurdles you'll face on a regular basis is staying on top of your tax obligations. A tax headache is only one mistake away, be it a missed payment or filing deadline, an improperly claimed deduction, or incomplete records.
You can also safely assume that a tax auditor presenting an assessment of additional taxes, penalties, and interest will not look kindly on an "I didn't know I was required to do that" claim..
Although retaining a good accountant or other tax professional may prove to be invaluable in avoiding tax troubles, possessing a working knowledge of how our tax system works is also beneficial. After all, even if you delegate your tax obligations to someone else, you'll still bear the ultimate responsibility for seeing that those obligations are met.
To help you along, we cover the major federal taxes to which you may be subject. We'll include tips for avoiding problem areas and for saving your tax dollars. Even if you're not interested in doing everything yourself, you'll find the information useful for resolving a specific tax question or for identifying issues you may want to raise with your tax pro.
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3 Ways to Reduce Your Taxes
Reducing Income
Adjusted Gross Income is a key element in determining your taxes. Lots of other things depend on your AGI - such as your tax rate and various tax credits. AGI even impacts your financial life outside of taxes: banks, mortgage lenders, and college financial aid programs all routinely ask for your adjusted gross income. This is a key measure of your finances.
Because your adjusted gross income is so important, you may want to begin your tax planning here. What goes into your adjusted gross income? AGI is your income from all sources minus any adjustments to your income. The higher your total income, the higher your adjusted gross income. As you can guess, the more money you make, the more taxes you will pay. Conversely, the less money you make, the less taxes you will pay. The number one way to reduce taxes is to reduce your income. And the best way to reduce your income is to contribute money to a RRSP or similar retirement plan at work. Your contribution reduces your taxable income, and lowers your tax bill.
Increase Your Tax Deductions
Taxable income is another key element in your overall tax situation. Taxable income is what's left over after you have reduced your AGI by your deductions and exemptions. Almost everyone can take a standard deduction, and some people are able to itemize their deductions.
Itemized deductions include expenses for health care, state and local taxes, investment property taxes , investment mortgage interest, gifts to charity, job-related expenses union fee etc, tax preparation fees,. One key tax planning strategy is to keep track of your itemized expenses throughout the year using a spreadsheet or personal finance program. You can then quickly compare your itemized expenses with your standard deduction. You should always take the higher of your standard deduction or your itemized deduction.
Your standard deduction and personal exemptions depends on your filing status and how many dependents you have. You can increase your standard deduction and personal exemptions by getting married or having more dependents.
The best strategies for reducing your taxable income is to itemize your deductions, and the biggest deductions are RRSP contribution, CPP contribution, union dues, gifts to charity, child care expense, disability support deduction, child and spousal support payments, medical expense; political contributions and moving expense.
Take Advantage of Tax Credits
Once we've tweaked our taxable income, we are ready to focus our attention on various tax credits. Tax credits reduce your tax. There are tax credits for college expenses, for saving for retirement, and for adopting children.
You may also want to avoid additional taxes. If at all possible, avoid early withdrawals from an CPP The amount you withdraw will become part of your taxable income, and on top of that there will be additional taxes to pay on the early withdrawal.
Some of the tax credit are as follows: Personal, spousal and dependant credits; child tax benefit, disability credit; caregivers credit.
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