13 Things You Should Know Before Filing Your Taxes

You Should Remember to Change From RRSP to RRIF

Turning 71 this year? Make a final RRSP contribution so you can lower your tax rate and get one last refund before converting to a Registered Retirement Income Fund, mandatory when you hit 71.

You Can Cut Your Tax Bill

Cut down the family’s tax bill by investing in the lower-earning spouse’s name so interest and capital gains are taxed at their rate.

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You Can Borrow from Your Spouse

If you’re the lower-income partner, borrow from your spouse to buy stocks and bonds. Write up a promissory note with the interest rate and principal, since it’s a loan. Earn more than two per cent on your investments, the current spousal loan interest rate, and you’ll make money. 

You Can Share With Your Kids

Give cash to your adult kids. Money or assets gifted to a child 18 or over don’t result in income attribution to parents.

You Should Start a Tax-Free Savings Account

You can give your son or daughter up to $5,500 a year to put in a Tax-Free Savings Account (TFSA). It compounds without penalty, and they won’t pay taxes on withdrawal. 

You Can Invest for Your Child

Income transferred or loaned to your children under 18 means you pay the tax on any dividends and interest earned. But not with capital gains. If you buy shares of growth companies in your five-year-old’s name with $50,000, by the time he’s 18, those shares could be worth $100,000. He can then withdraw, say, $10,000 a year, at a lower rate.

You Can Create an Account in Your Child’s Name

Deposit your child’s tax benefit cheque in an account in their name-income earned there will be taxed at their far lower rate.

You Can Invest in Education

It pays to invest in education. Earnings on a Registered Education Savings Plan (RESP) are tax-exempt. The federal government will pay a grant into the RESP that’s 20 per cent of your annual contribution, per beneficiary. And when your child starts post-secondary, funds can be withdrawn for free. 

You Can Help Your Student

Students always need money and should file a tax return even if they have no income. If they’re 19 years and older, they might qualify for refundable tax credits. 

You Should Know Where Your Investments Are

Pay attention to where you hold investments. GICs, bonds and other fixed-income investments should be held in a tax-sheltered account, such as an RRSP or TFSA, while U.S. stocks should be kept in a non-registered investment account, where the foreign withholding tax on dividends can be recovered. 

You Should Know About the Home Buyers’ Plan

If you’re buying your first home, you can make withdrawals for the down payment from your RRSPs thanks to the federal government’s Home Buyers’ Plan. You and your spouse can withdraw up to $25,000 each, tax-free, with 15 years to repay the loan. 

You Can Share Your Benefits

If you and your spouse are 60-plus and receiving Canada Pension Plan payments, you can share the benefits equally.

You Should Make Sure You’ve Got it All

Have you claimed all the tax refunds you’re entitled to? You have 10 years to adjust for errors or omissions in tax filings.