When you’re a business owner, one of the challenges is trying not only to pay for your own taxes but also those who depend on you. Fortunately, there are several ways that can help reduce what we owe including using passive income from investments or lowering our turnover rates so they don’t keep rising each year.
There’s no need to go through all these steps at once – start slow by looking into something small like trading hours and then work up from there!
Below are 8 top tips to help you pay less tax.
1. Make Use of Deductions and Credits
There are a number of deductions and credits available to taxpayers in Canada. Some examples include the medical expenses tax credit, the public transit tax credit, and the charitable donations tax credit. By claiming these deductions and credits on your tax return, you can reduce the amount of taxes you owe.
2. Invest in Tax-Advantaged Accounts
There are a number of investment accounts that offer tax advantages. For instance, Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs) allow you to grow your money tax-free. This means that you won’t have to pay taxes on any interest, dividends, or capital gains that your investments earn.
3. Defer Your Taxes
If you know that you’ll be in a lower tax bracket next year, you can defer your taxes by contributing to an RRSP. The money you contribute will be deducted from your income for tax purposes, which will reduce the amount of taxes you owe. When you withdraw the money from your RRSP at retirement, you’ll be taxed at your then-current marginal rate—which is likely to be lower than it is today.
4. Split Your Income with Family Members
If you have a spouse or common-law partner, you can split your income with them for tax purposes. This can be done by contributing to an RRSP in their name or transferring eligible dividends to them. Income splitting can help reduce the overall taxes paid by a family unit.
5. Take Advantage of Tax Treaties
Canada has tax treaties with a number of countries, which can save you money on taxes if you have income from sources outside of Canada. For instance, if you’re a Canadian resident working in the United States, you may be eligible for a reduced rate on your U.S.-based earnings thanks to the Canada-U.S. Tax Treaty.
6. Claim Business Expenses
If you’re self-employed or run a small business, there are a number of expenses that can be deducted from your business income for tax purposes. For instance, if you use part of your home for business purposes, you may be able to claim a portion of your rent or mortgage as a business expense.
7. Use Capital Gains Taxes to Your Advantage
Capital gains are profits realized from the sale of capital assets such as stocks, bonds, and real estate. In Canada, 50% of capital gains are taxable; however, this rate can differ depending on the province or territory in which you live. If timed correctly, selling capital assets can result in minimal taxes owing.
8. Minimize Intergenerational Taxes
When passing on wealth to future generations, it’s important to minimize the amount of intergenerational taxes paid. One way to do this is by giving gifts during life instead of waiting until death. Another way is through the use of trusts.
There are a number of ways to minimize the amount of taxes paid in Canada. By taking advantage Of deductions, credits, and tax-advantaged accounts, as well as strategies like income splitting and capital gains harvesting, taxpayers can keep more of their hard -earned cash.