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1 of 7 FALL Time to think about… Tax
Planning
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Personal income tax planning can make a difference in the income taxes you pay for 2006 and beyond if you consider certain opportunities before December 31st - or in some cases before the RRSP deadline of March 1, 2007. Remember that proper tax planning requires that you think ahead. Don’t wait until we are preparing your tax return, as many tax planning options will become limited or unavailable. The best time to think about this year, next year and beyond is now! Brose & Co. offers a year-end tax planning service, where we sit down and review with you all relevant issues that can impact the taxes you pay (see our article on “Asking the right questions”). Based on this year-end analysis, we can estimate the current year's potential tax bite, recommend tax minimization strategies for 2006 (RRSP planning, salary/dividend decisions, expenditure-timing etc.) and suggest a plan for the future. Many of you already use this approach - if you are not and would like to, please contact us to arrange an appointment. |
Some tips on taxesKnow your tax bracket. Knowing your marginal tax rate is the foundation of good tax planning. Knowing how much you pay will also help you to understand the value of many tax saving strategies. Income splitting strategies. Income splitting refers to moving income from one family member to another. Ideally, you only want to do this if you are moving income from a higher tax rate to a lower one. Some of the most common income-splitting strategies are utilizing spousal RRSP’s, buying RESP’s, and for seniors, splitting your CPP retirement pension with your spouse. Understanding after-tax investment incomeBe sure you understand the
after-tax return on investment income.
We can help make sense of the different tax rates that apply to
interest income, dividend income, trust income and capital gains. And don’t ignore the transaction costs
and the risk of your investment losing money. All factors can impact your tax planning approach |
Take advantage of tax deductions.A deduction is used to reduce your taxable income. The value of a tax deduction is equal to your marginal tax rate. RRSP’s are the most common strategy for tax deductions. Others may include pension contributions, union and professional dues, childcare expenses, moving expenses, support payments and interest expense (for business or investing). Planning for your medical and donation tax credits. Paying for significant medical expenses in one year can increase your tax savings. Donations are more flexible and can be carried forward up to five years. In either case the total amount can be claimed by one spouse, which can save more tax. Let us help
you establish a plan in advance to ensure that you are utilizing these and
other tax savings strategies. |
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