First off let me apologize - if you’re reading this at the end of March, then it’s probably too late to make significant changes that will impact how much you’re going to be taxed this year. But you already knew that, right? There’s no quick fixes in the financial world.
Sure, if you get yourself organized you can save money on accountant’s fees or simply by recognizing what you already owe. In other words, the damage is done.
So while taxes are at the top of your mind, let’s look forward to next year. How are you going to minimize the damage when it comes time to pay your 2018 taxes?
1. Put your Money in a TFSA
A couple weeks ago we talked about the TFSA advantage in Canada, but it deserves repetition. A lot of income earners in the lower mainland - scratch that, everywhere in Canada - have a nasty habit of watching their earnings grow without doing anything. Sure, it’s nice to see that number go up - but you can maximize your income if you invest in a tax free savings account.
Head here to learn more.
2. Understand Your Taxable Benefits
When it comes to the benefits you receive from your employer or as part of your spouse’s plan, it’s a good idea to line up each item with what you’re anticipating. In other words, don’t assume anything.
Medical expenses are one example of an area that often gets overlooked, or simply doesn’t receive enough scrutiny. There are costs such as health care premiums you can write off even if they’re not covered by your medical plan.
3. Avoid Unnecessary Interest Payments
Makes sense, right? Well, we miss a lot of our interest payments because we don’t know they’ve begun or we fail to follow through on the steps to prevent them from being triggered.
For Gabriel Baron, a senior tax manager at Ernst & Young, you can avoid excessive interest by keeping track of specific dates that will affect your taxes. “Most small business owners fall into this space,” says Baron. You can learn more about unnecessary interest payments here.
4. Make Consistent RRSP Contributions
Many financial experts agree that Registered Retirement Savings Plans are among the best tools to save for retirement. However, when it comes to the general public - people who aren’t paid to monitor the financial market on a daily basis - it can be difficult to remember to contribute. This leads to people saving up and investing one large sum once per year. That’s usually a big one-time hit that’s difficult to swallow, so you know what happens? People simply don’t do it.
You can automate everything these days. Set up a recurring RRSP contribution with your bank, something easily manageable on a monthly basis, and then you don’t have to worry about it.
All seems simple enough, right? Following these tips will make next year’s tax season a lot easier to manage.
As long as you start now!