How to reduce your income taxes
It's unavoidable: if you work… you pay taxes, a fact that applies to both new members of the workforce and students working part-time.
Before filing your income tax return, you need to know that your salary isn't the only kind of taxable income. Tips, investment Investment: Amount of money invested to generate profit. income, bursary income and RESP contributions are also taxable. So how can you pay the least taxes possible?
Two strategies would work in your favour. The first is that you shouldn't be afraid to use the tax credits you are entitled to for your post-secondary school fees and the interest paid on your student loan Loan: Amount of money lent for a predetermined period of time. .
The second strategy is to contribute Contribute: To make a payment into a retirement plan. to an RRSP RRSP: (Registered Retirement Savings Plan) Savings method that allows you to put savings in tax-sheltered investments during your active life to supplement your income when you retire. Your RRSP savings will not be taxed until you withdraw them. , so you can reduce the taxes you pay now and save money for your retirement.
Your RRSP will entitle you to a tax break and you benefit from compound growth, which increases your retirement income. Better still, the income generated by your RRSP investments – interest, dividends Dividends: Part of the earnings of a company that is paid to its shareholders, who receive an amount in proportion with the number of shares they hold. or capital gains Capital gains: Profit from the sale of capital assets (i.e., long-term assets such as stocks, bonds, land or businesses). – is also tax-sheltered Tax-sheltered: You will not have to pay income taxes on money you invest in a tax-sheltered investment (e.g., RRSP) until you withdraw the funds. !
If you earn regular income, don't hesitate to contribute to an RRSP by regular instalments: an efficient way to gradually build up your portfolio. If you start contributing now, you'll save on your income taxes.
These are only a few tax strategies. Meet with a financial advisor to find out more!
Find out more
See the Plan your retirement section.
This column was written by Mélanie Lefebvre, Youth Focus Advisor at the Caisse populaire Desjardins de Mont-Tremblant.
