Year End Tax Tips – Pay Less Tax in 2014

While 99% of us are busy shopping, eating and drinking and complaining about the sorry state of our finances, 1% of people (the wealthy ones) are meeting with their tax advisors and planning all out, how to minimize their taxes and maximize their after tax income. You see, in Canada for every $100 taxable income reduction by tax planning you save almost $44 in taxes. You can easily pay off your holiday shopping bill with just few simple year end tax saving strategy.

Tax planning is a year around activity. But if you ignored it, all year long, this last few days of the year, where you must take action to minimize your 2014 tax.

So, here are some ideas.

1. Canadians are big in giving. Federal government is also encouraging us to give by giving us, big tax credit. For 2014 you can take advantage of the First Time Donor’s Super Credit, which is available from 2013 to 2017. Ordinarily the donation tax credit would be equal to just 15% of your charitable gift for donations of less than $200, but if you’re a first-time donor, you can take advantage of the Super Credit to get a tax credit of 40%. In addition, the regular tax credit rate for donations of $200 to $1,000 is 29%, but with the Super Credit, the rate jumps to 54%.
2. RRSP is not a tax saving strategy. It is a Tax Deferral strategy. If you are in a higher tax rate, contributing to your RRSP will lower your income tax rate and your net tax payable for 2014.
3. Most Canadians ignore the tax benefit of medical expenses. Many of the medical and health related expenses can be claimed as medical expenses for tax credit. You must take advantage of this. Get an annual medical expense statement from your medical and health service provider.
4. TFSA and RESP do not reduce your tax. But it sure gives you some tax free income in coming years. Review your TFSA investment and if your money is growing tax free, feel free to top up your TFSA room. Don’t let free money fall through your hand for your child’s education. Make sure you have RESP contribution for all your dependent children.
5. Sell off investment to realize capital gains, if you have lower income in 2014 and unused capital losses from prior years. The gain could be almost tax free if you have unused capital losses.
6. If you are in a business, plan for 2015 hiring and firing of your employees.
7. If you paid installment taxes in 2014, make sure you don’t over pay your annual tax 2014. Adjust your last installment tax payment, closer to your actual 2014 tax bill.
8. If you are an employee, its time to review your source withdrawing. Submit a new TD1, if you had changes in your family.
9. Did you borrow money to invest in 2014? Don’t forget to claim the interest of the loan. Safety deposit box for investment are not tax deductible from 2014.
10. Keep a record of all Child Care expenses to claim Child Care Expense Credit.
11. If you are thinking of effectively reduce your taxes for 2014, now is the best time to consult with a Tax Advisor. Remember, after December 31, 2014 you are all out of luck for 2014 tax reduction.