Tax Saving Strategies

Canada is one of the best country on earth to live in and we are lucky to live in this country. However, Canadian tax law is very strict and complete. The biggest expense we pay in our life is the taxes.

How much tax we pay out of our income?

Have you ever thought how much taxes we pay from our earned income? As a Canadian tax resident, any income we earn worldwide is subject to income tax. Any interests, dividends, capital gains, employment income, commissions, business income, rental income, etc. are subject to income tax. As an individual, you need to pay an extra 22% - 44% in income taxes after basic personal tax credit for every dollar you earn.

Besides income tax, we have to pay many other types of taxes. When you buy your home, you have to pay property transfer taxes generally (1% for the first $200,000, 2% thereafter); When you own a property, you have to pay property tax every year; When you buy a car, a computer or clothes, you have to pay Goods and Services Taxes (GST) at 6% of the value and 7% consumer taxes (PST) if we live in BC. When you travel and live in the hotel, you have to pay hotel room tax besides GST and PST. If you buy a bottle of wine at liquor store, you have to pay alcohol tax besides federal tax. The Liquor Consumption Tax is a 10% tax on the total selling price of beer, wine, and spirits. When you buy or import goods out of country, you have to pay import taxes. Of course, We also need to pay gas tax. In total, how much taxes do we pay out of our gross income in one sort or another? It is estimated that we might pay about 40% of our gross income as taxes!

Is there any way we can reduce our tax payment?

The answer is yes. There are some strategies you can adopt to reduce your income tax. The one of the best tax shelter for average individual is to own corporations. People who work for corporations (i.e., employees) earn, pay taxes and then spend whatever is left. A corporation earns, spends everything it should, and is taxed on anything that is left. That makes a lot difference. One side has to pay taxes based on gross income and the other side can pay taxes based on net income. However, corporation is a separate legal entity and it also costs accounting and legal fees to maintain the corporation. If the earnings are under $30,000 per year, generally we would not suggest that you use corporation unless the earnings will go up quickly year after year.

If you can not use your own tax shelter, you might want to use tax shelter other organization created which Revenue Canada approved program. This program can save you thousands and thousands of dollars in taxes immediately and have a cash-on-cash return over 89%. How does it work? You can consult with our accountant - Eva Ye.

For the FREE tax strategy reports listed below, go back to HOME page and fill in your name and email address there, then you get the reports right there.