Taxes are a bane for just about everyone except accountants, but they are an inevitable fact of life. The rules are constantly changing and it can seem like the deck is stacked against the honest taxpayer. Don't despair though; there are still simple ways for Canadians to limit their tax exposure. In this article, we will look at some of them.

Borrow to Invest, Save to Buy

The days of debt-free living have pretty much come to an end and almost everyone in the country is carrying some type of debt. Surprisingly though, the right kind of debt can help make a small dent in your tax bill. A car loan or credit card debt incurred to buy that new sofa you've had your eye on, however, is not the right type of debt. A loan used to purchase an inv💟estment is. 

The reason is that the interest on loans taken out for the purpose of investing is tax deductible. The interest on anything else you assume to debt to buy is not. From a tax perspective, you're better off using cash or savings for these discretionary purchases and then borrowing to invest rather than the converse. However, as far as your 澳洲幸运5官方开奖结果体彩网:personal finances go, no debt is the best kind of debt.

Max Out Your RRSP

Registered retirement savings plans (RRSPs) are the government's weak apology for its tax-gouging ways. You may as well take advantage of the bone they throw you and extract the most value from this tool. When talking about borrowing to invest, 澳洲幸运5官方开奖结果体彩网:maxing out your RRSP is usually a sensible approach provided tha💃t you are able to service the loan in a reasonable period of time.

Taxes and Investments

Some investments—such as stocks—are accorded preferential 澳洲幸运5官方开奖结果体彩网:tax breaks on 澳洲幸运5官方开奖结果体彩网:dividends and 澳洲幸运5官方开奖结果体彩网:capital gains, whereas other fixed-income investments aren't. Depending on your tax bill and the rate of inflation, holding your money in fixed-income investments that are taxable may actually cost you money. If you are holding a tax-protected retirement portfolio and an income portfolio, consider keeping a smaller percentage of your fixed-income investmen🐼ts in the taxable portfolio.

Marriage Maneuvers

澳洲幸运5官方开奖结果体彩网:Income splitting with your spouse or contributing to their retirement account will help reduce your tax bill, especially if there is a large gap between your incomes. However, this will require professional assistance to structure contributions♛ in a way that will withstand aꦦn audit. 

Start a Business

Owning a business allows you to deduct expenses you incur to help you earn an income. These could include the business use of your car, 澳洲幸运5官方开奖结果体彩网:home office, salaries paid to your kids, and any supplies you use to provide goods or services. This advice is often suggested as a way to reduce your taxes. While it is true that a side business can help you reduce your tax bill, it is not for everyone. For example, farmers enjoy some of the biggest tax breaks out there, but they rarely make enough money to truly enjoy the tax advantages. As with farming, creating a business that loses money will hurt your overall financial situation more than paying taxes does. If you 澳洲幸运5官方开奖结果体彩网:have a business plan that su🧸ggests you'll generate a profit, go for it. If not, look for another strategy.

The Bottom Line

Keeping track of what write-offs apply to your situation can be difficult. For most people, finding the right 澳洲幸运5官方开奖结果体彩网:accountant is the most important step in reducing your taxes. All of the a🐻forementioned strategies are legal, but your accountant will be able to look🍌 at your finances and tell you which ones are viable. Look for an accountant through friends and colleagues whose tax profiles are similar to your own. Most importantly, keep up-to-date with your tax situation and keep an eye out for anything your account may have overlooked—accountants are still human. The more you understand about your own tax situation and the ways to reduce your exposure, the better prepared you will be to take full advantage of your accountant's expertise.