What is Tax Planning?
The art of tax planning is to invest, save and plan in respect to being tax efficient. The analysis of your current financial situation is an important task if saving income ranks highly on your priority list. The purpose of a tax planning advisor in Canada is to reduce and/or defer the most amount of taxes paid by an individual or corporation in any given period of time with the fundamentals of their respective financial plan working together in the most tax-efficient manner possible. Decreasing tax liability and taking full advantage of your eligibility to contribute to retirement plans are both vital for accomplishing your financial goals and needs.
A crucial part of investment planning should consist of tax planning. A tax deferral strategy might be good plan for wealth & tax management purposes. It benefits an individual or company that wants to delay the process of having to pay tax at the present time and wanting to push it to a later date in the future. There are two advantages for deferring the payment of taxes: it’s a preferable financial scenario for certain individuals to pay tax dollars tomorrow than it is to pay today and the individual also has control of when he/she wants to pay the taxes instead of letting the Canada Revenue Agency (CRA) decide.
Nowadays, using a retirement plan is one of the most prevalent way to efficiently minimize taxes for saving purposes. Individuals can contribute their money into some of the following accounts to help reduce or defer tax liability: a Registered Retirement Savings Plan (RRSP), a Tax Free Savings Account (TFSA), are amongst the more popular options for contributing and saving money. Of course, there are many more types of accounts and savings plans. There are several benefits to every type of account or pension plan. However, the benefits do vary from one type of account to another. Eg. RRSPs can be used to buy a home and finance higher education. TFSAs allow you to contribute money without a tax deduction unlike RRSPs.
While splitting of earned income for tax purposes was revoked by the Federal government, other income splitting options may still be available. The best Financial Planners are able to give individuals seeking advice on tax planning many options and strategies to divide their income that are within the rules and regulations of the CRA. Spousal RRSPs, splitting CPP, pension splitting, RESPs and Family Trusts are only few of many potential alternatives available.