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Tax Planning

Readying all of your tax slips and filing your annual tax return can occupy a fair bit of time during March and April. Note that doing such is not considered tax planning; consideration for tax planning should be done all year. Here are some examples that you should consider during the year, by the time March or April rolls around, it will be too late to make adjustments for the previous year. You have all year to make RRSP contributions for the current year, in addition, the CRA allows you to make RRSP contributions for the previous year until 60 days into the following year. That gives you extra time to see where your income for the year will end up and if an RRSP contribution will be beneficial to you.

Tax-Free Savings contributions can be made all year, and, if you neglected to max out a previous year since 2009, you can make the contribution now. It is important not to exceed the maximum allowable but can be just as important to invest what you can in a TFSA. Sometimes, depending upon your own situation, instead of contributing to an RRSP.Contributing to a RRSP or TFSA and leaving the funds in cash or a savings account is not really tax planning. Making the money work for you within the account is the benefit. Purchasing an investment such as a mutual fund, stock, or GIC (Guaranteed Investment Certificate), depending upon your risk tolerance, is when you are taking full advantage of the account benefit. For those of you with taxable dispositions during the year, you may consider selling a ‘loser’ investment that will trigger a capital loss – this will be deducted from your capital gain for the year, and you will pay less tax on the profitable sale. It is sometimes hard to sell an investment that has lost money because it ‘could always come back’, but sometimes ‘a bird in the hand’ is more valuable. Tax planning often goes hand in hand with estate planning, if you want to leave a legacy, plan for it. There are strategies you can implement that will help to offset the taxes that will be payable to CRA upon your death.-Obtain proper advice, talk to an advisor and start planning today. A second opinion is free, its value may be priceless.

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