Tax season got you down? Learn how to keep more of your hard-earned money and start saving taxes today. Kerry Bryan from Nova Scotia is an expert in taxes, business bookkeeping & accounting. She has helped thousands of people and businesses over the years with everything from filing taxes, consulting, business set up, bookkeeping and many other services as needed. We asked her a few questions about how to save taxes in Canada.
How do rich people save taxes?
Rich people do still pay taxes. However, sometimes they are able to take advantage of tax breaks such as maybe creating businesses or corporations to shelter their income. Corporations are taxed at a much lower tax rate than personal taxes.
And what can ordinary people learn from it?
Seeing the amount of tax we pay on our income can be very frustrating. We can be satisfied if we do our best to save money that goes to the Canada Revenue Agency by staying informed about what we can do to reduce those taxes and take advantage of every deduction we can.
Does it make a difference in which province you live in Canada?
Yes! Unfortunately our tax rate in Nova Scotia is one of the highest in Canada and the tax credits are few.
I want to save taxes in Canada. Where do I start?
You should always try to take advantage of as many tax deductions as possible, such as saving for retirement in the form of RRSP‘s which are a tax deduction (based on prior year income). However, be mindful that when you withdraw an RRSP it becomes taxable income. Also, taking advantage of the new First Home Savings account that allows a first time home buyer to contribute up to $8000 per year towards a new home and that will allow you to deduct that on your tax return. Another underused tax credit is medical expenses, these would include premiums paid, dental, services such as chiropractor etc. and other medical expenses.
I have a Facebook group where I post new programs available to people thru CRA and the Provincial Govt such as Heat rebates and Grants. One thing I always tell my clients is “I work for my client, not CRA” so I will do all I can to save them money!
What’s your first advice for everyone?
Always file your taxes on time to take advantage of any benefits offered by CRA such as GST, Carbon tax credit and advanced workers benefit. Always make sure you have enough taxes come off your income so as to eliminate a tax bill at the end of the year.
There is a wonderful plan set up by CRA called a Tax Free Savings account (TFSA) which allows you to save money without having to pay taxes on that interest – a great way to save for emergencies or future plans. However, be mindful of the limits per year as you cannot over contribute, but what you don’t contribute per year you can carry the contribution amount forward to future years.
How will a second job affect my tax?
Many young people choose to have a side hustle for extra income. What should they consider about how this will affect their taxes?
A second job is a great way to add extra income to your finances but sometimes the tax implications are forgotten. It is important to fill out a TD1 form (provincial and Federal) and note on that form you work more than 1 job (when you do this it tells your employer to start collecting tax at the first $ earned). Another issue can be the 2nd job may only be part time, hence much lower taxes deducted per pay period. So you need to make sure at least 30% tax overall is coming off your gross income combined between all jobs.