How To Maximize Tax Return Canada In 2024?
Stay updated with current accounting standards, business compliance, tax preparation tips, and latest news.
How Can I Lower My Taxable Income In Canada?If you know how to save money on taxes in Canada, lowering taxable income will not be an issue, regardless of the province where you live. Here we’ve provided 8 strategies you can use to lower your tax bill.
Take Advantage Of Tax Credits And DeductionsFrom medical to moving, childcare to union dues, and charitable donations to home office expenses… there are over 100 tax deductions available to Canadians. However, a commoner who isn’t an expert in finances, or holds a degree in that matter, may find it difficult to apply them appropriately. Be 100% sure to research the deductions that apply to your expenses, and try to take full advantage of them while filing taxes. Need help with finding the right deductions? You can reach out to a CPA in Surrey Canada for a free 30-minute consultation now!
Contribute to a Registered Retirement Savings Plan (RRSP)Have you enrolled in Registered Retirement Savings Plans (RRSPs) yet? If not, you are missing out on a plethora of benefits. Here’s how they work – If you contribute $5,000 to your RRSP and your marginal tax rate is 20%, you save $1,000 in taxes. The funds in your RRSP grow tax-free until withdrawal, allowing your savings to compound at a faster rate. To maximize tax benefits, consider timing your contributions based on your anticipated tax bracket. Remember, the CRA sets annual contribution limits, and unused contribution rooms can be carried forward. Seek professional guidance to optimize your RRSP contributions and ensure compliance with tax regulations.
Hire Your Family MembersDoes your spouse stay at home? We are sure they will have some contribution to the success of your business. Thus, why not use that contribution to claim a tax refund Canada? Hire your spouse/ child as an employee in your business, it can maximize your tax return. Pay them a salary and claim deductions for their wages, which will reduce your overall taxable income. What are the perks? The first $12,069 of employment income is tax-free! It means that you can further bring down your taxable income to a few notches. For businesses with low-profit margins, this is one of the top tax tips for Canadians.
Separation of Business & Personal FinanceDoesn’t matter if the scale of your business is small or large, or whether you have an in-house accountant or not. One has to make it a habit to always pay for business expenses with separate credit or debit cards. Or you could be the next big red flag for CRA because your books and records will be a mess. We get it, there are gray-area expenses. For example, you might be a home kitchen/ restaurant. In such cases, deduct the cost of kitchen equipment and utensils purchased specifically for business purposes. You can also look for professional bookkeeping for restaurant services to sort your business and personal expenses.
Split The IncomeTax planning Canada in 2024 is incomplete without this strategy – Income splitting. In this tax strategy, we move income from a high-income earner to a lower-income earner so that it reduces the overall tax bill of the household. Here are some ways of doing it:
- Pay a lower-income spouse a salary
- Transfer assets to a lower-income spouse
- Set up a family trust
- Invest in a spousal or partner RRSP
- Utilize prescribed rate loans
Stay Informed About Tax Law UpdatesThe Canadian government introduces 13-15 tax law updates annually. Each year, they target different sectors of the economy. To maximize tax return Canada, you have to keep an eye out, follow these updates, and track all the new deductions, credits, or exemptions made available to your line of business. Many of these relief measures are announced in late February- early March. To catch all these benefits made available on time, subscribe to newsletters from taxation experts like CJCPA, and visit CRA’s website regularly. Keep a proactive approach to leverage all available opportunities to reduce your tax liability and enhance your overall tax refund.
Maintain Accurate And Detailed RecordsThe Canada Revenue Agency (CRA) estimates that Canadians miss out on billions of dollars in tax deductions each year because they don't keep adequate records. There aren’t enough words to describe how crucial it is to keep detailed records to claim tax deductions in Canada. Besides, unorganized last-minute tax filing may be an invitation for a CRA Audit, probably due to a lack of accuracy and adequate supporting evidence of your claims. If you are new to this, we have some tips to get you started on your journey to organize your financial documents and claim eligible documents:
- Collect all receipts and invoices
- Scan and save electronic copies
- Organize hard copies
- Label and categorize
- Retain records for six years