These tax tips are the personal opinion of our tax advisers. They may not be suitable to everyone.

Claim all deductions
Claim all possible deductions from your taxable income (though there is not too many). Some of them are:

Defer Taxes
Defer taxes wherever possible. Tax rates will be lower in future years. For example, instead of selling securities in December, they should be sold in January next year if there are any realized gains.

Dividend vs. Interest
Invest in securities or mutual funds that declare dividends instead of interest. Tax is lower on dividend income.

Income Split
Income can be split between the spouses to take advantage of lower tax rates for lower income spouse. For example, spouse with lower earnings, can borrow money from spouse with higher earnings at a lower rate of interest and invest it at higher rate of interest. Also, self-employed people can hire their spouse or children over 18 years of age in to there business and pay them a reasonable salary.

RRSP
Contribute maximum possible in RRSP even if you have to borrow. Use the tax refund to pay the borrowings. However, interest paid on funds borrowed to invest RRSP in not tax deductible.

Self directed RRSP are better than investing in mutual funds.

Investment in mutual funds is better than investment in Money Market funds or Canada Savings bonds. Investment in stocks is better than investment in mutual funds.

RESP
RESP is not tax deductible but is a very efficient tool to protect for children future. The government also contributes up to 20%. In addition, the income earned on RESP is not taxable in the hands of the contributor. It is used to finance the education expenses of the beneficiary.

RRSP vs. RESP
Do both if possible. If cash flow is a concern and only one has to be selected, prefer RRSP. Invest tax refunds into RESP. That way you can use both. RRSP contributions reduce taxable income, which may result in saving over 40%. RESP contributions only attract up to 20% contribution by government.

Home Buyers Plan
Prefer to own your house instead of renting.

Uses your RRSP up to a maximum of $20 000 and use it as a down payment on your first house, or if you have not owned a house within the last five years, use it on a new house.

Savings
Where to invest savings? Use your savings to reduce personal debt or pay off the mortgage. Interest paid on personal loans or home mortgage is not deductible. However, you can use the same equity in home to refinance and invest elsewhere. The interest paid on borrowings for investment purpose is tax deductible.

Suggestions - Questions?
Feel free to contact us if you have any suggestions or questions regarding taxes.

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