Step 3: Legally Minimize Taxes Paid part 2

Let’s review the tops ways you can save tax.

Maximizing all tax deductions & credits – It’s common knowledge that all taxpayers are given the opportunity to take advantage of all tax deductions and credits applicable to them so let’s make use of them to help us save on our taxes! It is recommended to seek professional advice to identify all deductions and credits available.

For employees, consider opening a home based business – A small business is one of the best tax savings tool. We are talking about a simple sole proprietorship and not a big enterprise. The most significant benefit of full or part time self employment is that you will be able to increase the amount of deductions you are entitled to write off.

What about tax credits?

Many tax credits can be split between spouses, and occasionally with parents and even grandparents. Splitting tax credits is especially beneficial when one spouse has little or no income. Every person in Canada is entitled to a personal exemption, where you can make up to an set amount of income without paying any tax on it. (currently $10,320 Federally and $16,775 Provincially) If one spouse is not using the personal exemption the other spouse may claim any unused portion. Some tuition and education amounts may be transferred to spouse, parents or grandparents. Disability amounts can be transferred to spouse or to parents. Age and Pension amounts can also be split between spouses, as well as transit and children’s fitness credits. The bottom line when you are splitting income, deductions and credits you want to pay the least amount of total family tax!