Tax stress can be felt all year round, but it really starts to make its presence known around April. Installments, personal taxes, corporate taxes, employer health taxes, payroll taxes, the list of payments is never ending. As a result of this stress, we will be introducing a new series focused on tax RELIEF.
We will be looking at various tax breaks and techniques you can use to alleviate your tax stress all year-round. Here is the list of the topics we will be covering in this six part series.
R – Risk
E – Exemptions
L – Losses
I – Interest
E – Estate planning
F – Family
As an introduction, we are previewing below the topics discussed in the upcoming articles.
Risk: A major cause of tax stress is caused by worrying about the Canada Revenue Agency’s (CRA) assessment of your tax claims. Understanding what is on the CRA’s radar and what the risky tax claims are will help you manage one source of anxiety. In particular we will look at items considered to be the riskiest tax deductions, taxable income you didn’t know you received including various taxable shareholder benefits and areas the CRA’s audit team are taking a closer look at.
Exemptions: You have probably heard of the principal residence exemption and the capital gains exemption before. These are two of the biggest tax breaks available for Canadians and they protect you from taxes on your two biggest assets: your home and your Professional Corporation (PC) shares. Failing to understand and utilize these exemptions appropriately could cost you $200,000 per individual. We will look at how you qualify for these exemptions, when to use them and what could go wrong.
Losses: Not all our investment decisions turn out to be winners; however you can make the most of losers if you plan appropriately. Understanding what a capital loss, non-capital loss, allowable business investment loss and superficial loss is will give you insight on how to make those investment losses a little more bearable. If you fail to plan appropriately, you could end up paying taxes even when you have losses.
Interest: Debt is a necessary part of most dentists’ careers. Student debt, credit cards, line of credits, home mortgages and practice loans are all debts that dentists are use to paying. With debt comes interest, some of which is tax deductible while others are not. We will discuss in detail which debts to pay off first, which debts are tax efficient and some of the tax pitfalls with using debt to fund your personal expenses.
Estate planning: Are you worried you haven’t left enough savings for your retirement? What about your loved ones? We’ll look at strategies to preserve your savings so that they can be left for those you care about and not spent on fees and taxes. This article will look at RRSP withdrawals, wills and allocating the assets in your estate to family, friends and charities in a tax efficient manner.
Family: The fastest and easiest way to relieve tax stress is to have your family help you take on some of this burden. The income tax laws can provide favourable tax treatment to families with the right planning. Between income splitting, child care expenses, spousal RRSP and registered education savings plans, there is a tax break you could use with every member of your family. Missing out on these breaks could cost you a family vacation or more.
Tax relief is in sight, with a basic understanding of what’s available you can reduce your stress levels and begin to enjoy the month of April once again. After all, winter is nearing its end and spring is in the air.
This article was prepared by David Chong Yen, CPA, CA, CFP and Louise Wong, CPA, CA, TEP of DCY Professional Corporation Chartered Accountants who are tax specialists and have been advising dentists for decades. Additional information can be obtained by phone (416) 510-8888, fax (416) 510-2699, or e-mail firstname.lastname@example.org / email@example.com. Visit our website at www.dcy.ca. This article is intended to present tax saving and planning ideas, and is not intended to replace professional advice.