Tax Planning

We will assist you in organizing your financial affairs in order to reduce your tax liability. We can assist you in determining the most tax-efficient ways to hold your investments and overall assets, as well as guide you through changing tax regulations.

There are three main ways to reduce your taxes, and each has several variations. You can lower your income, increase your deductions, and benefit from tax credits.

Our team will review your financial situation and assist you in developing a comprehensive tax strategy during our initial consultation.

Individual tax minimization strategies

Splitting income with family members

Although family income splitting is an important tax planning approach, many Canadians are overlooking simple income splitting options that have already been approved by the Canada Revenue Agency (CRA). If you have a low-income spouse or children or grandchildren, you might want to set up a prescribed rate loan to split your income. If you want to income split with family members, it’s critical to grasp the impact of the Income Tax Act’s “attribution” provisions. These laws have the effect of reimbursing taxable income to the family member who provided the capital for investment, effectively negating any tax savings.

Making a specified rate loan to a properly constituted family trust or directly to a spouse utilizing a formal loan arrangement can evade the attribution laws. The CRA sets the required rate on a quarterly basis. The rate in force at the moment the funds are loaned should be applied, and it will continue in effect for the duration of the loan. Your spouse or the family trust pays you annual interest on the loan, which they may be able to deduct. The interest you earn must be included in your income. The tax savings should more than compensate for the tax you pay on the interest you earn from the loan if the rate of return on investments is higher than the rate of interest paid and this plan is properly implemented.

Family Trust

If you have low-income children, grandchildren, nieces or nephews, you might want to consider setting up a family trust to redirect investment income that would otherwise be taxed at a high marginal rate in your hands to your low-income family members.

Income earned in the trust and paid or made payable to the trust beneficiaries may be taxed at their marginal tax rate if correctly formed (subject to the attribution rules). Because of the tax credits accessible to people, each person can receive a certain amount of income tax-free each year. The revenue from the family trust can also be utilized to pay for your child’s costs (private school fees, lessons, gifts, and so on), which you may have been paying with your after-tax funds all these years.

Before utilizing trust income to pay for a child’s costs, parents and trustees should consult with us for more information.

Spousal Loan

Consider arranging a spousal loan to transfer investment income and capital gains to your low-income spouse. You’ll be able to take advantage of your spouse’s reduced marginal tax rate as a result. The technique entails you transferring monies to your low-income spouse via a formal loan agreement with an interest rate set by the CRA. Your spouse can then invest this money and make investment income while paying taxes at their lower marginal tax rate.

Invest in tax-free savings account through a registered account (TFSA)

Consider providing a gift to your adult family members or spouse to enable them to contribute to a TFSA in addition to investing in one yourself. All investment income grows tax-free in the TFSA, and future withdrawals are not taxable. Furthermore, regardless of who pays the account, there will often be no income attribution. If you give money to your spouse, attribution does not apply as long as the money stays in the TFSA.

Registered Education Savings Plan (RESP)

Do you intend to fund your child’s post-secondary education? If that’s the case, you should consider opening a RESP. Despite the fact that your contributions will be made after-tax, the RESP will benefit from tax-deferred growth and government grants. When your child enrols in a qualified post-secondary education programme and makes withdrawals, the income produced in the plan may be taxed in your child’s hands at a lower rate than yours.

Select tax-advantaged investments

Flow-through shares are a type of stock that allows money to flow through

A flow-through investment is a tax-advantaged investment that encourages investors to put money into resource firms engaged in exploration and development in the mining, oil and gas, renewable energy, and energy conservation sectors. If properly constituted, the resource company will “renounce” or “flow-through” its expenses to you, which you can then deduct on your tax return. The amount you paid for the investment is the maximum amount you can deduct. You can use the deductions to reduce your net income by applying them to all sources of income. It’s critical to think about the investment’s quality rather than just the possible tax deduction.

Tax-exempt life insurance

If you have excess assets that you want to leave to your heirs, you should probably think about how they’re invested. The income earned will be exposed to your high marginal tax rate if you just invest the assets in a non-registered account. When you die, your assets can result in hefty tax obligations, which are frequently addressed by liquidating your estate’s assets. If you have a large number of assets that you want to safeguard from taxes, tax-exempt insurance can help you do so. This form of permanent life insurance payout can help you pay off your debts while also preserving your estate.

Permanent life insurance policies (whole life and universal life) offer both life insurance and savings opportunities. Assets inside a tax-exempt life insurance contract accumulate free of annual accrual taxation under the federal Income Tax Act. When you die, the proceeds of your policy are paid to your beneficiaries tax-free and outside the limits of your estate, avoiding the fees connected with your estate.

Maximize your tax credits and deductions

To maximize your tax savings, you should be aware of all possible tax credits and deductions. The medical expense tax credit is sometimes neglected. Keep track of your out-of-pocket medical expenses and receipts to see if you qualify for the credit.

Giving to charity is one way to dramatically lower your own tax bill. Consider donating publicly listed securities in-kind to verified charities. Any capital gain realized as a result of the donation will not be subject to tax. You will also obtain a tax receipt for the security’s fair market value at the time of gift. This can assist decrease your total tax liability and save you money over donating the funds to charity.

Retirement Benefits Plan (RCA)

Consider the benefits and drawbacks of having your employer establish an RCA as part of your remuneration package if you are an executive. It is an employer-sponsored and funded retirement savings plan that allows bigger contributions than other registered plans.
It is an employer-sponsored and funded retirement savings plan that allows bigger contributions than other registered plans.

Employer contributions to an RCA are not taxed to you. This may reduce the amount of income due to higher tax rates. Employers can normally deduct 100% of their contributions, and RCA payments are completely taxable as other income at retirement. The RCA lets you defer tax on your employer’s contributions.

When you reach the age of 65, you may be entitled to income split your RCA payments with your spouse. Deductions for non-residents and those in lower tax brackets may also be available.

As this list is not exhaustive, please contact to discuss tax planning strategies that are best suited to your stage in life and your situation.

The information contained herein has been provided for information purposes only. The information has been drawn from sources believed to be reliable. Graphs, charts and other numbers are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. This does not constitute a recommendation or solicitation to buy or sell securities of any kind. Market conditions may change which may impact the information contained in this document.  Wellington-Altus Private Wealth Inc. (WAPW) does not guarantee the accuracy or completeness of the information contained herein, nor does WAPW assume any liability for any loss that may result from the reliance by any person upon any such information or opinions.  Before acting on any of the above, please contact your financial advisor.