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As this year’s tax-filing deadline approaches, here are some general tax tips that may help you keep more money in your pocket.
Tip 1: Save in tax-efficient accounts like RRSPs and TFSAs
While RRSPs and TFSAs have different benefits and limitations, you can have both accounts at the same time.
With that in mind, let’s take a look at some of the key differences.
Wondering which account is best for you?
RRSPs and TFSAs each have their own merits. A financial advisor can help review your personal circumstances and investment goals to help you choose the solution that works best for you.
The above chart provides highlights of RRSPs and TFSAs. It is for information purposes only and is not intended to be investment or tax advice. Investors should consult a professional advisor for specific investment and tax advice.
The above chart provides highlights of RRSPs and TFSAs. It is for information purposes only and is not intended to be investment or tax advice. Investors should consult a professional advisor for specific investment and tax advice.
1. Your RRSP contribution limit can be found on your most recent Notice of Assessment from the Canada Revenue Agency.
2. $5,000 maximum contribution limits for each year from 2009-2012. $5,500 maximum contribution limit for each year from 2013-2014, 2016-2018. $10,000 maximum contribution limit for 2015 and $6,000 maximum contribution limit for 2019. If you have never contributed to a TFSA, you can contribute up to $63,500 for 2019. Contact the Canada Revenue Agency to confirm your available TFSA contribution room.
Check out our guides to RRSPs and TFSAs to find out more.
Tip 2: Make sure that all available tax credits are claimed
Many tax credits are available, including credits for eligible medical expenses, child care expenses, youth and seniors’ activities, and for first-time home buyers. In the case of non-refundable tax credits, some unused credits can be transferred to the higher-income spouse or common-law partner.
What’s the difference between a non-refundable and a refundable tax credit?
Non-refundable tax credits are designed to reduce your federal tax payable, but they don’t create a tax refund.
With refundable tax credits, even if you don’t owe any tax, the total amount of your refundable tax credits will result in a tax refund and will be paid to you.
Tip 3: Find out about possible caregiver tax credits
Where you are responsible for the care of a dependant as a result of mental or physical infirmity, or disability, several tax credits may be available, such as the Canada Caregiver Credit or the Infirm Dependant Credit. Additionally, fees paid for a dependant’s nursing home or attendant care may be claimed – in some cases in combination with the “disability tax credit.”
As the rules around these possible tax claims can be complex, speak to your tax advisor to determine which tax claims might be available to you.
Tip 4: Make spousal RRSP contributions
Spousal RRSPs are another effective way to split income during retirement. The long-term goal of investing in a spousal RRSP is to minimize taxes for a couple during retirement by putting retirement income in the hands of the lower-income spouse.
By equalizing each spouse’s retirement income, the overall tax bill is reduced by keeping both spouses in a lower tax bracket. Talk to your financial advisor for more details.
Keep in mind that these tax tips are not comprehensive and are general in nature. Everyone’s situation is unique, and you should consult a tax specialist for advice specific to your financial situation.
