1) If you’re thinking of buying bonds or GICs,
early in the year is the best time to do it.:
This is because taxes are payable on accrued interest
earned annually, regardless of when the interest
is actually paid to you. For example, by buying
in January instead of the previous December, you
effectively deferred paying taxes on the income by
one year.
2) If you’re thinking of buying mutual funds,
it’s better to do it early in the year instead of
late in the year.:
This is because many mutual funds make their
distributions near year-end, and the distribution
amount is effectively included in the purchase price
and will be taxable in that year’s return. By buying
after distributions, your cost may be lower and taxes
will be deferred.
3) Start an automatic savings plan to your
RRSP and/or TFSA.
:
It’s a good idea to set up regular and automatic bank
transfers to your registered accounts. By socking
away part of your income to registered accounts, you
will not only save taxes at year-end but you will also
not spend money that you don’t have easy access to.
Even by putting away just $50 a paycheque, you’ll
save $1,200 by year’s end (that’s before adding up
your tax deferrals on the investment income and on
your RRSP contributions).
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4) Apply for a reduced payroll source deductions:
If you regularly receive tax refunds because of
various tax credits like dependent claim and RRSP
contributions, consider having your employer
withhold less tax from your paycheques. Talk
to your company’s HR department to have the
necessary paperwork completed for this to happen.
You will effectively end up having more money
sooner, rather than after your tax filing.
5) Make your interest paid deductible:
If the purpose of your loan is for investment or
business, the interest paid is deductible. Consider
borrowing to buy your non registered, income-
producing investments. They include stocks, bonds
and real property. Interest paid must be tracked
and is fully tax deductible.
Consider borrowing to start or grow your business.
Interest on the money used for this purpose is fully
deductible for tax purpose.
6) Contribute to an RESP:
A contribution of $2,500 towards a child’s RESP will
qualify for a $500 grant from the government. If you
have prior non-contributory years, there’s a potential
to qualify for up to $1,000 of free money for
contributions up to $5,000. Plan and start saving
early in the year so you’re not madly scrambling to
come up with the money before December 31st to
qualify for this year’s grant.
7) Get your financial plan ready:
It’s sad to see that only about one in five people
have any financial plans. Consider making one now
or updating the one you already have. Failing to plan
is a plan to fail. A good way to start is by reading
the Personal Budgeting Kit, and using the worksheets
that come with the kit to take you step by step
through the planning process.
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