, FL (PressExposure) June 02, 2009 -- Income taxes are among the largest expenses you pay during your life. Canadian citizens may very well pay almost as much as half their annual income back to the government each year. Fortunately there are many tools you can use to manage your finances in a way that you with significant savings and reduce your taxes dramatically.
A large part of the tax savings strategies to disseminate your earnings through your inner family network and hence to the benefits of lower tax brackets. In this group of instruments you will find some very interesting possibilities such as:
* Family Loan Structuring & Accounts
* Private & marriage RRSP Contributions
* Claiming deductions Home & Home Office Costs
* RESP Contributions
* Medical Contributions
* Using family
* Donations to Charity
From 2009 there is a new tool in operation to as Tax-Free Savings Account (TFSA). It is similar to an RRSP account, but with some important differences. For example, withdrawals are not taxable and do not affect other government benefits. On the other hand, deposits are not deductible. There is a maximum limit of $ 5000 savings per year, which translates to significant savings in the span of several years.
Life Insurance also offer significant advantages and may provide useful tools for reducing your taxes and pave the way for maximizing welfare.
There are some advantages of its use over other forms of investment, for example traditional RRSP accounts and other assets such as stocks.
* No risk: the minimum guaranteed rate policies profitable under all circumstances. Life therefore useful if one of your primary long-term investment tools.
* No Probate fees because it is a liquid asset, it is one of the best ways to wealth to the next generation in your family. In the event of your death, they do not have to pay any additional fees Probate and there is no tax liability. In provinces such as Ontario, this can amount to very large amounts - you will be able to avoid unnecessary costs.
* You pay no taxes on income. Depending on your insurance, your savings grow tax sheltered and you can also use the accumulation of funds to compensate for your future premiums with pre-tax dollars instead of after tax dollars.
* Cash values within the policy can be consulted at any time within certain limits by means of a policy loan or partial surrender. Often, these financial instruments, the equivalent of a tax-free income stream. However, be sure to understand that straight withdrawals are subject to taxes. Consult your advisors first in each case.
* Donations and charity in the form of life insurance are tax deductible. These are little known options that may involve the transfer of ownership to the charity, naming the organization as the policy or the replacement of the donated assets to a new insurance that will not affect the legacy you want to leave. These options allow you to give all future gifts of substantial quantities at modest costs in the present.
These instruments are well known to most people speculate tax cuts and often recommended first. When using them, you know what the expected amount of income tax you pay for to see what options are most effective in your individual case. You can use online tools such as Canadian income tax calculator.
To conclude, it is important to understand that taxes are a complicated matter, and they deserve professional attention. Be sure your options with independent advisers first and only informed decisions.