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Connaught Education Services
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Vancouver, BC, V6H 4E4

A little time now can help you save or defer BIG on taxes

The time is now to seriously plan and act on saving some taxes. Take a few minutes to see if you have considered most or all of the following items to maximize your tax savings this year.

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).

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.


Reminders – for individuals :

RRSP contribution deadline to qualify for 2011 tax deductions – 2012/02/29

2011 tax filing deadline for individuals – 2012/04/30

2011 tax filing deadline for self employed individuals and their spouses – 2012/06/15