Now that we are into 2013, I thought I would provide tips to help you reduce your tax bill for this year and provide other money saving information.
Make your mortgage interest tax deductible by refinancing and in-vesting the equity in your home. You can refinance or take out a second mortgage and use the funds in an investment that has the potential for growth or to earn income.
Any interest on the mortgage amount used for an investment is tax deductible.
Invest in a tax free savings account and earn interest without paying taxes. You can contribute up to $5,500 to a TFSA in the 2013 tax year and up to $20,000 since 2009 ($5,000 per year from 2009 to 2012).
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Interest earned or capital appreciation in this account is tax sheltered and does not have to be included in income.
This is one of the best tax shelters for investment income.
Split pension income with your partner to optimize both of your tax positions. You could reduce the wages of a spouse working on the farm and move pension income from the higher-income spouse to the lower-income spouse to take advantage of pension splitting and income smoothing.
If you or your spouse is receiving pension income and the other spouse is in a lower tax bracket, up to 50 percent of pension income can go to the lower income earner to take advantage of that lower tax bracket. This can reduce the overall tax burden of both partners.
Time capital gains and capital losses to reduce overall tax burden. Decide when to buy and sell assets and securities. If you incur a capital gain early in the current tax year, you could decide to recognize capital losses toward the end of the year to offset capital gains that must be included in income.
Make use of spousal Registered Retirement Savings Plans to split income with your spouse. Move reportable income to the spouse with a lower tax bracket so that less tax is paid on the same income upon re-tirement.
The Canada Revenue Agency has allowed taxpayers to use their contribution room to set up and contribute to a spousal RRSP which entitles the contributor to transfer the contribution to the spouse.
The beneficiary can then withdraw the funds either in the future or at retirement and it becomes their income.
The funds must remain in the plan for a minimum of three years before the beneficiary can claim the income and not have it attribute back to the contributor.
