A Great 2008 Income Tax Calculator And Tips On Saving Taxes

Posted on February 7, 2009
Filed Under Retirement |

Income taxes are amongst the biggest expenses you have to pay during your life. Canadian citizens are looking into paying as much as almost half of their annual income back to the government every year. Luckily, there are many tools you can use for managing your finances in a way that yoursquo;ll end up with significant savings and cut your taxes dramaticaly.brbrMany tax savings strategies deal with spreading your earnings through your inner family network and thus getting the benefits of lower tax brackets. In this group of tools yoursquo;ll find some very interesting possibilities such as:brul type=circleliFamily Loans Accounts Structuring/liliOwn Spousal RRSP Contributions/liliDonations to Charity/liliClaiming Home Office Deducting Home Expenses/liliRESP Contributions/li/ulbrIrsquo;ve outlined the above methods in another article titled a href=http://lsminsurance.ca/tips/investment/tax-savings-tips target=’_blank’tax savings tips for Canadians/a for a quick reference. From 2009, therersquo;s also a new tool in effect called Tax-Free Savings Account (TFSA). It is similar to an RRSP account, but with some significant differences. For example, withdrawals are non-taxable and they donrsquo;t affect other government benefits. On the other side, deposits are non-deductible either. Therersquo;s a maximum cap of $5000 for the savings every year, which translates to significant savings over the span of multiple years.brbrLife insurance products also offer significant advantages and can be useful tools for lowering your taxes and paving the way for maximizing wealth.brThere are a number of benefits of using life insurance products over other forms of investments, for example traditional RRSP accounts and other assets such as stocks.brbrbNo risks involved in life insurance/b: the minimum-guarantee percentage will keep the policy profitable under all circumstances. Life insurance therefore makes sense as one of your primary long-term investment tools.brNo probate fees: since life insurance is a liquid asset, itrsquo;s one of the best ways to pass on wealth to the next generation in your family. In the event of your death, they donrsquo;t have to pay any additional probate fees and therersquo;s no tax liability. In provinces like Ontario, these can total up to very large amounts ndash; yoursquo;ll be able to prevent these unnecessary expenses.brbThe proceeds are paid out TAX FREE/b Depending on your insurance package, your savings grow sheltered from taxes and you can also use accumulation funds to offset your future premiums with pre-tax dollars rather than after tax dollars.brbCash values inside policies can be accessed at any time/b within certain limits through a policy loan or partial surrender. Often, these financial tools can create the equivalent of a tax-free income stream. However, be sure to understand that straight cash withdrawals are subject to taxation. Consult your advisors first in any case.brbDonations and charitable giving/b in the form of life insurance policies are tax-deductible. These are little known options which can involve transfer of ownership to the charity, naming the organization as the policy beneficiary or replacing the donated assets with a new insurance policy that will not affect the inheritance you wish to leave. These options all allow you to give future gifts of significant amounts at modest costs in the present.brbrThese tools are well known by most people speculating on tax cuts and often get advised first. When using them, yoursquo;ll need to know the projected amount of income taxes yoursquo;d pay before to see which options are the most effective in your individual case. For this, you can use our a href=http://lsminsurance.ca/calculators/canada/income-tax target=’_blank’tax calculator/a.brbrAs closure, it is important to understand that taxes are a complicated matter and they deserve professional attention. Be sure to consult your options with independent advisors first and make only informed decisions.brbriLorne S. Marr, President of Lorne S. Marr Insurance Services Ltd. has been a practicing financial planner and an expert on a href=http://lsminsurance.ca/ target=’_blank’Canadian life insurance/a/i.

Tags: Retirement

A Great 2008 Income Tax Calculator And Tips On Saving Taxes

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