Ways To Reduce Income Tax

Here are five ways to reduce income tax (after consulting your accountant or tax specialist)

  1. defer taxes
    • e.g., with RRSPs and cash value life insurance
  2. income splitting
    • from higher income earner to lower income spouse or family member
  3. tax-preferred investments
    • capital gains have lower tax than dividends which have lower tax than interest
  4. maximize credits and deductions
    • e.g., use all RRSP contribution room
  5. tax-deductible loan interest
    • if borrowing to invest in nonregistered investments with a "reasonable expectation of profit" (e.g., mutual funds, real estate, segregated funds, your business, etc)
    • NOT when borrowing to invest in registered plans (RRSPs, RESPs) or cash value life insurance

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