The low-hanging fruit
Canada has two national programs that help you save on taxes in the short and long term. Both are highly effective if you have the willpower and the means to save money and invest in your future.
Improve your financial well-being
Registered retirement savings plans (RRSPs)
The federal government will let you shelter up to 18% of your earned income in an RRSP, where it can grow tax-free until you take it out of the plan, typically when you retire.
In the short term, every dollar that you contribute to your RRSP gets deducted from the amount of income you declare. This could result in a big, fat income tax return that you can spend any way you please.
You can learn all about RRSPs and how to get started in this highly informative article titled "What Is an RRSP?"
Tax-free savings accounts (TFSAs)
TFSAs won’t save you any money on this year’s tax return but they can save you a mountain of tax money over your lifetime.
You can put money into a TFSA, invest it, and keep all the profit if your investments go up. Anyone over the age of 18 can open one of these tax-free beauties and start contributing money up to the annual limit set by the government.
If you’re into tax-free cash, read more about why TFSAs are a gift from the government that you just have to open.
Wealthsimple x MoneyWise
Dig for deductions
The Canada Revenue Agency (CRA) is continually adding new deductions to the tax code. For example, new measures were implemented during the COVID-19 pandemic that allowed you claim home office supplies as a tax deduction if you were asked to work from home. You can find out if you qualify by visiting the CRA website.
Fun fact: You could earn $400 an hour
If you spent two hours researching tax deductions and you saved just $800 on next year’s tax bill, you would have earned $400 an hour for your time. That’s about how much a lawyer makes.
Make taxes a family affair
Married couples and parents with children often qualify for tax deductions that aren’t available to single people with no kids. If you aren’t confident in your ability to identify all the savings you deserve, have a tax professional prepare your return. If they find even one additional deduction, it’s well worth the fee.
Talk to human resources
If you work for a company that still has a human resources department and offers employee benefits, you’re lucky. Book some time with your HR administrator to review all the programs and incentives you can sign up for in order to reduce your taxes today or down the road when you retire. Taking advantage of things like group savings and insurance plans is almost always in your best interest.
Work your side hustle
If you’re self-employed or running a side hustle, you could be able to write off your work-related expenses. As long as you earn money for what you do, any reasonable business-related expense can be claimed as a deduction. Keep in mind that a “tax deduction” is not a refund. You simply get to reduce the income you declare, so you get taxed on a smaller amount.
Start saving today, before the April 30 tax deadline
The deadline to file your income tax return is April 30. (This year, that falls on a Saturday, so Canada Revenue Agency is giving everyone until May 2.) That gives you plenty of time to start exploring ways to lower your tax bill. If you’re ready to get started, here are 10 tax credits to be aware of.
You're 5 minutes away from the best mortgage
Searching for your perfect mortgage shouldn’t be hard.
Homewise is an online brokerage that will negotiate on your behalf with more than 30 big banks and other lenders, completely free, and it only takes five minutes to apply.
If you're in the market for a new mortgage, or if you're looking to refinance before interest rates rise again, go to Homewise now and answer a few simple questions to get started.