Today is Tax Freedom Day – when we start working for ourselves, and not the government.
According to the Fraser Institute, Tax Freedom Day measures the total yearly tax burden imposed on Canadian families by federal, provincial and municipal governments. If Canadians paid all their taxes upfront, they would work the first 164 days of this year before bringing any money home to their families.
Annually, the average Canadian family with two or more people will pay $52,675 in total taxes. That represents 44.7 per cent of their income ($117,731) going to income taxes, payroll taxes (including the Canada Pension Plan), health taxes, sales taxes (like GST), property taxes, payroll taxes, fuel taxes, carbon taxes, “sin” taxes, and so many more.
So today, we owe it to ourselves to look for every opportunity to save on the amount of taxes we have to pay. Here are just few ways to lower your tax bill:
- Maximize RRSPs. RRSP contribution are tax deductible, and income generated in the plan are tax deferred.
- TFSAs. In a tax-free savings account, you can hold the same broad range of securities like an RRSP, but unlike an RRSP, they cannot deduct their contributions from their taxable income. On the plus side: unlike RRSPs, returns from investments in a TFSA are not taxed – ever.
- Buy a home tax-free with the Home Buyers’ Plan. Some may be unaware they can access their RRSP to purchase a home without having to pay the withdraw tax when making their down payment. The maximum amount that can be borrowed is $25,000. The key word is borrowed. The money must be paid back to your RRSP over 15 years, in equal installments beginning the second year after the withdrawal. Budget 2019 proposes to increase the Home Buyers’ Plan withdrawal limit to $35,000. This would be available for withdrawals made after March 19, 2019.
- Claim qualifying medical expenses, pool them as a family and keep your receipts.
- Make your debt deductible this year. Interest is deductible only if you’ve used borrowed money to earn from investments or a business.
No one wants to pay more in taxes than you have to. Look for ways to deduct, defer and divide to lower your family tax bill.