Quick Tips to Help You Reduce the Taxes You Pay

Since, we have just submitted our personal income tax returns, now is a good time to plan for lower taxes in 2007.

The following 10 tips are some of the ways you can reduce the taxes you pay.

1. Review your investment mix for tax efficiency such as minimizing interest income in non-RRSP portfolios and keeping capital gains and dividend income earned on equity investments outside an RRSP.
2. Review all outstanding debt and pay off non-deductible amounts. Consider converting some non-deductible debt into deductible debt.
3. Defer a year-end bonus to January if you will be in a lower tax bracket next year.
4. Pay amounts such as professional dues, child care, alimony/maintenance, investment counsel fees, interest charges, medical expenses and charitable donations by December 31st.
5. Pay interest on family loans incurred in the previous taxation year by January 30th. A family loan is an ideal way to split investment income with a spouse - the prescribed rate on family loans entered into during the first quarter of 2007 is 5%.
6. Pay your income tax instalment by December 15th to minimize non-deductible interest charges.
7. Maximize available RRSP contribution room, as early in the year as possible.
8. Report charitable donations and medical expenses for both spouses on one income tax return for maximum benefit.
9. Consider setting up a family trust for income splitting opportunities.
10. For small business owners, review your salary/dividend mix to minimize personal and corporate income taxes. Declare a bonus by the company's year-end and pay within 180 days to defer personal income taxes.