STEP 2: TAX PLANNING
July 1st of each year has been referred to as “tax freedom day”. This means that most Canadians work six months of each year to pay some form of taxes. And the other six months of each year you get to keep the balance of your earnings (this compares for four months to pay and eight months for yourself in the USA).
Despite the modest proposals for tax reduction often made by our federal and provincial governments, for most Canadian families income tax remains the largest single annual cash outlay. It significantly erodes disposable income and the wealth of families. By implementing a variety of tax planning strategies, Canadians can minimize the effects of a potentially large tax burden and maximize personal wealth.
Some simple and effective Tax Planning Strategies that are available to Canadians are:
- Start a Home Based Business
- Income Splitting
- Charitable Donations
- Choose Capital Gains over Dividends and Dividends over Interest Income.
- Prepare a Will
- If you own a Business, do the following:
- Pay yourself Dividend vs. Salary
- Pay your children a Salary