After reporting your income, you will list the deductions. Deductions will reduce your total income. For example, if your total income is $100,000 and your total deduction is $10,000, your net income will be $90,000.
Common tax relief includes:
- RRSP (Registered Retirement Savings Plan) and FHSA (First House Savings Account) Donations
- The amount of elected split pension
- Investment management fees
- Benefits of investment loans
Reduce taxes to reduce your net income and help you retain more or all of your OA. The best deduction available to senior couples is the “elected allocated pension amount”, which allows high-income partners to transfer 50% of their pension or registered retirement income fund (RRIF) income to their low-income partners.
Canadian income tax guide
The deadline, tax prompts, etc.
Next level of tax relief: Credits
Once you calculate your net income, you can still reduce your taxes through your tax credits. While taxes reduce your income, tax credits reduce tax owed. Tax credits are usually calculated as a specific dollar amount multiplied by 15%.
Common tax credits include:
- Basic personal amount
- Number of ages
- Pension Income Tax Credit
- Disability Tax Credit
- Charity Tax Credit
- The amount of home buyer
- Medical expenses
- Tuition tax credit
These federal tax credits are more valuable than they seem because they reduce the basic federal tax, which in turn lowers the secondary and provincial taxes.
Protect your investment income
So far, I’ve been discussing how to use tax breaks and credit to reduce the amount of federal and provincial taxes you pay, but you also want to take advantage of tax shelter.
Tax shelter prevents your income (interests, dividends, capital gains) from one year to the next. No tax shelter, interest, dividends or realized capital gains will increase your income and the taxes you have to pay. If growth occurs in tax shelter, it is usually not necessary to report income. A popular and popular tax shelter is the Registered Retirement Savings Plan (RRSP), which also provides you with tax breaks. With deductions and subsequent refunds, you will have more money to invest. Although the money is within RRSP (or after 71 years old, RRIF) there is no tax. You are not taxing the income from your income, which means your RRSP is growing faster than your taxable account, which is a huge gain I found. Other common tax shelters include the Tax-free Savings Account (TFSA), Registered Education Savings Program (RESP), First Housing Savings Account (FHSA), and Life Insurance.
