How Can I Benefit From Tax Planning?
Tax planning is a crucial aspect of financial planning for individuals, families and businesses. Many Saskatchewan families rely on an accountant or tax preparer to help complete their filings each year. Tax professionals do an excellent job of filing your papers and telling you what you owe, but they frequently seem to give little constructive advice as to how you can improve your tax planning.
That’s where Mavi Wealth Management comes in: we use our knowledge of the tax code along with your unique individual circumstances to create a long-term tax plan that helps you minimize your tax burden and keep more of your hard-earned cash.
Personal Tax Planning
Canada was recently ranked as the #1 country in the world for quality of life and the overall third-best country in the world by US News & World Report. Canadians have plenty of freedom and access to government services, but we also pay some of the highest income tax rates in the world. This simple reality amplifies the importance of effective personal tax planning.
At the same time, Saskatchewan has some of the lowest provincial income tax rates in Canada:
Saskatchewan residents are also afforded a tax-free basic personal amount of $16,065, while residents of other provinces such as B.C. receive just over $10,000.
Personal tax planning in Saskatchewan varies based on your employment situation and how you generate and receive income. For public or private sector employees, most of your tax liability will come from income tax. You may have income from investments, dividends or capital gains that could increase your tax liability. Self-employed professionals and contractors can have more complicated tax planning needs, such as calculating and deducting eligible expenses from income.
Business Tax Planning
Business tax planning is significantly different from personal tax planning in Canada, thanks to the unique provisions of the Canadian tax code to incentivize small business and help small business owners.
Business owners can pay money from the business to themselves in the form of salary (wages for work performed) or dividends (a share of the profits from business). Business owners may also be able to split income by paying salaries or dividends to family members.
To balance out these advantages, businesses have increased responsibilities. They must collect taxes on behalf of the government in the form of HST/GST, they may be requested by the CRA to make quarterly or monthly tax payments, and they are more likely to be audited.
Businesses of all sizes need professional tax planning to help them reduce their tax burden to the extent permitted by law while continuing to fulfill legal obligations to the CRA.
Tax Planning Tips for Saskatchewan Residents
Whether you’re self-employed, own your own business or work for someone else, there are certain things that every resident of Saskatchewan can do to improve their tax planning.
Maximize Your RRSP Contributions
A Registered Retirement Savings Plan (RRSP) is a special type of savings account that makes it easier to save for retirement by allowing Canadians to contribute pre-tax dollars and defer some of their tax burden. If you made $50,000 this year, but contributed $8000 to your RRSP, you can report just $42,000 of income, while other investments would still require you to report the full $50,000. Canadians pay income tax on RRSP dollars when they are withdrawn during retirement.
Maximize Your TFSA Contributions
Tax-free savings accounts (TFSA) offer Canadians the opportunity to earn tax-free investment income on deposits of up to $5,000 per year. The best part is that annual contribution limits for TFSA carry over to subsequent years, so you could be able to invest a substantial amount and pay zero tax on any earnings you collect.
Keep Those Receipts!
If you’re self-employed, learning to accurately document and claim your business expenses against your income is a key aspect of reducing your tax burden. Depending on your unique circumstances, you may be able to write off utility bills, mortgage payments, vehicles, gas and other major expenses.
Frequently Asked Questions about Tax Planning in Saskatchewan
The major focus of our tax planning process is helping you reduce your tax burden, and that includes helping you earn income through tax-free avenues. In Canada, many different types of income are considered tax-free. Some typical examples include:
- Gifts and inheritances
- Lottery winnings
- Death benefits from life insurance policies
- Working Income Tax Benefit (WITB)
- Canada Child Tax Benefit
- All income earned by First Nations, if living on a reserve
- Income earned using a TFSA
- Winnings from gambling or betting
While we would not recommend gambling for income, we can help you structure your inheritance to minimize your tax burden while passing on your wealth to the next generation.
The IPP is a special type of defined benefit pension that is uniquely available to owners of incorporated businesses. With an IPP, benefits are set according to your current salary and the contributions are calibrated to achieve a defined pension benefit once you reach retirement age.
IPP contributions are tax deductible and tax deferred, which can make them more attractive retirement savings tools than even RRSPs. Through our tax planning process, we can review your options and find a strategy that makes sense for you.
Our approach to Tax Planning is easy.
Whether you’re a business owner, self-employed or working for someone else, our process begins with a thorough understanding of your present tax situation, including your projected earnings for the year, anticipated tax burden and other unique circumstances.
Based on your individual requirements, we use our expertise in the Canadian tax code to identify provisions, credits and strategies that can help you reduce your tax burden and keep more of your money.
We deliver a customized tax strategy that lets you keep more of your money for the things that matter.