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Tax Effective Strategies
Included here are just a few of the strategies that could help you maximize the after-tax return on your investments and lower your overall tax bill.
Strategy #1 - Consider Carrying Forward Deductions
Once RRSP contributions are maximized, keep in mind that deductions for RRSP contributions can be carried forward indefinitely to a future tax year. Carrying forward your deduction may be beneficial where you expect your taxable income to be higher in the near future and the deduction will be worth more to you.
Strategy #2 - Tax Exempt Life Insurance
Life insurance products offer attractive investment options for tax sheltering your savings. The Income Tax Act allows for the tax-sheltered accumulation within insurance contracts, subject to certain maximums. You can take advantage of this tax-sheltered growth to meet your various insurance needs (such as RRSP/RRIF Insurance, Capital Gains Insurance, Business Insurance, etc) as well as to provide for future income.
Strategy #3 - Charitable Giving
Charitable giving allows you to give to the charity of your choice while providing a reduction to your tax bill. Charitable donations of up to 75 percent of your net income (100% of net income in the final two taxation years of your life) qualify for tax credits, thereby reducing your tax bill. Additionally, for donations of publicly-traded securities made after May 1, 2006, the capital gains inclusion rate is zero. There are many ways to make substantial donations, such as gifts of cash, shares of publicly traded securities and life insurance products.
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