THE BLOG

3 Simple Ways To Save Taxes

02/03/2016 03:00 EST | Updated 02/03/2017 05:12 EST

Today, it takes more brains and effort to make out the income-tax form than it does to make the income. - Alfred E. Neuman

1) Prioritize Three Contributions

RRSP

  • Offers best tax sheltering option for many - ask if your employer matches contributions (if so, maximize that benefit)
  • Maximum contribution is the lesser of $24,930 or 18% of earned income in 2015 (minus pension adjustments, plus unused contributions from previous years)
  • If you've never contributed, use past contribution room or carry forward indefinitely
  • The deadline is February 29th, 2016

TFSA

  • Available to all Canadian residents aged 18 and over
  • TFSA contributions aren't tax deductible but income, interest and capital gains earned in the account accumulate tax-free
  • 2016 contribution amount is $5,500, to a maximum contribution room of $46,500
  • Great estate planning tool - funds pass to spouse tax-free and probate-free

RESP

  • RESPs offer a way to split income with children and/or grandchildren while providing a higher education
  • The Canada Education Savings Grant (CESG) will match 20% on the first $2,500 per year, up to $7,200 (until the beneficiary turns 17)
  • Maximum contribution: $50,000 per beneficiary

2) Income Splitting Options

Spousal RRSP

  • Ideal strategy to balance income at retirement
  • The higher earning spouse contributes to the Spousal RRSP rather than his or her own RRSP, and takes the deduction
  • At retirement, the lower income spouse withdraws funds at a lower income tax bracket
  • A spouse does include a common law partner

Family Trust

  • Typically used to share dividend distribution from a private company to family members
  • Dividends are paid without sharing control of the company
  • Tax rules limit potential benefits
  • Complex tax planning tool - please ensure to enlist the help of a tax advisor

1% Loan

  • "Giving" funds to a spouse to invest on your behalf does not avoid taxes being attributed back to you
  • Loan funds to your spouse at a prescribed rate under the CRA
  • Current prescribed rate is 1%, payable by January 30th the following year

3) Tips to Financial Control in 2016

  • Review your portfolio with your Investment Advisor to ensure maximum tax efficiency
  • Determine a transparent, asset-based fee that aligns your portfolio's performance with your advisor's compensation
  • Ask your wealth management team for a Wealth & Estate Plan to make sure you stay on track
  • Stay up to date with the latest tax changes in Canada: LEARN MORE HERE

Ludovic Siouffi is an Investment Advisor with Canaccord Genuity Wealth Management, and a Chartered Investment Manager (CIM®). For more information, please visit lswealth.com.

This article is solely the work of the author, not an official publication of Canaccord Genuity Wealth Management (CGWM). All information is given as of the date appearing in this article and the author does not assume any obligation to update it or to advise on further developments related. All information included has been compiled from sources believed to be reliable, but its accuracy and completeness is not guaranteed, nor in providing it do the author or CGWM assume any liability.