It's Tax Time….5 Tax Tips To Save Money On Your 2014 Income Tax Filing | Compass Wealth Partners

It's Tax Time….5 Tax Tips To Save Money On Your 2014 Income Tax Filing

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1. Contributing to RRSPs

Has your financial advisor been coaching you to add regular amounts to your RRSP? This little nugget of wisdom not only helps you save for the day when you are no longer earning a pay-cheque, but also helps you defer paying taxes on that money today, as well as grow that money tax deferred. This tends to be one of the single most impactful tricks to reducing your tax liability for most tax payers.

2. Claiming all eligible medical expenses

Most people don’t bother tallying their medical expenses as a result of the qualification threshold: expenses exceeding the threshold of $2,171 or 3 percent of net income can be claimed (as per the Income Tax Act). Annual medical expenses can easily add up and the list of qualifying expenses is long. Keep your receipts and make sure to talk to a tax expert if you are unsure about qualifying expenses.

3. Transferring unused tax credits

There are a number of tax credits for students that are eligible for transfer to a spouse, parent or grandparent. These can be transferred after the credits have been used to reduce the student’s taxable income to zero. This can work to further reduce a transferee’s tax liability who may be in a higher tax bracket. This benefit can be especially useful for married couples when one individual goes back to school and the other is in the workforce.

4. Don’t have any income!? Don’t think you shouldn’t file a tax return

So many individuals out there think that if they don’t make any income that they don’t or shouldn’t file an income tax return. Think again. Aside from the fact that we are all obligated to file income taxes on an annual basis despite the level of individual earned income, the government has a whole host of qualifying benefits for low income earners. If you don’t file your taxes, you don’t get the benefits.

5. Income-splitting, pension-splitting and pension sharing

Pension sharing, income-splitting and pension-splitting are all ways that households can reduce their overall tax liability. For qualifying households, these tax initiatives help put more income into the hands of the lower-income partner. If taken advantage of, these tax initiatives can help some families reduce their overall tax liability by hundreds, if not thousands of dollars.