As a new year begins and tax season approaches we would like to offer a couple of tax-saving resolutions to add to your list
Add money to your Tax Free Savings Account.
A TFSA contribution does not get deducted from your tax return but the investment income it earns is all yours – tax-free!
“Under proposed legislation, starting January 1, 2016, the annual TFSA dollar limit for 2016 will decrease from $10,000 to $5,500.00,” according to the CRA and the Liberal party election promise. If you can afford to put money into a Tax Free Savings Account, it is a good idea to do it sooner rather than later to get the most benefit.
Remember, contribution limits are cumulative so if you haven’t already topped up your TFSA and didn’t remove funds from it last year, your contribution limit could be as high as $46,500 in 2016!
Top up your Registered Retirement Savings Plan.
RRSPs have been around for a long time and great advice is available at your bank or from your financial advisor. It is always best to add to your RRSP on a regular basis with automatic payments. That way you can adjust the tax deducted at source and claim the deduction throughout the tax year.. But if you are like many Canadians, you will wait for the February 29th deadline to contribute. Remember that the rule for contributions in the following years is the first 60 days of the year, which means in a leap year, your deadline is February 29th and NOT March 1st like other years.
Stay on top of tax installment payments.
Instalments payments are due quarterly on the 15th of March, June, September and December. They can be paid through online banking, using your debit card on the CRA’s My Payment or My Account tools, by cheque or at your financial institution using Form INNS3, Instalment Remittance Voucher.
My favourite is using online banking. It’s easy to set up post-dated payments once for the whole year. Any time you can “set-it-and-forget-it”, count me in. Just be sure you have the funds in your account to cover the current installment payment.
Make sure your TD1 is up-to-date
The TD1, Personal Tax Credits Return, is used to determine the amount of tax to be deducted from your employment income or other income, such as pension income. You completed this form when you first started work and your employer may ask you to ensure your TD-1 and provincial equivalent is up-to-date at this time of the year.
It is important that this form be up-to-date so that you don’t end up paying more tax than necessary through the year. Yes, you will probably get it back when you file your tax return but really, wouldn’t you rather just pay less tax in the first place.