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| FINANCIAL REPORT |
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| Canadians Love to Pay Tax |
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| Every year I listen to individuals whine about how much tax they paid. Yet, after I access their situation I always find ways to reduce their taxes - some by 100%. Did you know that if you earn less than $24,000 in dividend income, as your total income, the tax credits that you receive will offset all tax? That’s right, you pay no tax on $24,000 dividend income if that’s all you earned. This is just one of the many different strategies that are available that some of you should take advantage of. Another widely utilized strategy is ‘systematic withdraw plans’ or ‘swips’. This is when you invest in a mutual fund and redeem units as a form of income. Initially while you redeem the cash the tax effect is again zero because you initially redeem your own principle. This is a fantastic strategy for providing long term growth and initial income without the tax burden. This strategy works exceptionally well for individuals who want their principle to grow and maintain a good income. The tax benefit comes into play with those who want the income to initially be tax-free because they will have some other taxable form of income. This keeps the tax at a moderate level. To reduce the risk of investing in stock funds you can also segregate the funds to make your investment risk free and estate proof. One of the easiest strategies is to ‘income split’. There must be thousands of articles every year on this subject but few Canadians who are eligible make use of this. I met a couple who had just retired. All the assets were invested in only one of the spouses’ names, including the pensions and RSPs. As a result they will pay an extra $27,000 in tax because they didn’t plan his finances properly. If he had met with an advisor he would have adjusted and saved an extra $2,000 per month. What could you do with an extra $2,000? Some business owners are fantastic business people but terrible at planning ahead for their own futures. I’ve seem individuals work all their lives to build a fantastic business just to watch a hefty percentage paid out to tax later on. There are many strategies available from company structures to insurance strategies that help offset tax. The only problem is that if you do not act immediately it could be too late. I know of several other strategies that are also effective and it’s all legitimate. It all comes down to one simple fact. INFORMATION. Go to the experts and spend the money to get their advice. One individual paid over 2 million in taxes trying to save a few thousand dollars in legal and accounting fees. So, if you want to do something about saving tax; get a good accountant, get a good financial advisor, and get a good lawyer and then... get a good travel agent. Mark Twerdun, SVP Senior Investment Advisor TD Evergreen (905) 501-8209 twerdm@tdbank.ca |
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