Bil Ioannidis Financial Insights Weekly - Business &Amp; Personal

The benefits of a tax plan – now and in your future This fact of life probably won’t surprise you: The number one expense for nearly every Canadian is … taxes. However, it is very possible to legitimately save on taxes now and in the future with the right tax plan. Good tax planning is all about perspective. Too often – and especially with tax deadlines looming – people fixate on the short term. Their perspective narrows to getting that tax return in on time, obsessing about tax credits, or desperately trying to come up with as much money as possible to fill up that very desirable Registered Retirement Savings Plan (RRSP) contribution room. All of that is very important, of course – but it’s not tax planning, it’s tax preparation. A common dictionary definition of plan is: a system for achieving an objective; a method of doing something that is worked out in advance. That’s tax planning. It takes a long-term perspective to save on taxes now and in the future, to maintain your tax payments at the most optimal level, to avoid surprises – and to keep more money in your pocket over the long term. Here are just a few examples of your planning options:  You already know that an RRSP contribution delivers the biggest tax break available to most Canadians but maybe you shouldn’t maximize that deduction on your next return. If your tax burden is manageable this year. And if you know that you will be in a higher tax bracket in a few years (RRSP contribution room can be carried forward indefinitely) when the deduction will be more valuable.  You’re nearing retirement and you know that you are likely to generate more retirement income than your married or common-law partner. Consider contributing to a spousal RRSP – a strategy that can equalize retirement income streams and lower your combined tax bill.  You have children. Plan to invest child tax benefits in a child’s name. The income earned is taxable in the hands of the child who may not have enough income to generate a tax bill.  You expect to get a fat tax refund. That’s not necessarily a good thing. It means you’ve loaned your money to the government tax-free. Consider requesting a reduction of taxes withheld at source. Tax preparation is unavoidable but the right tax plan will make that yearly task much less taxing. Wrap your tax plan inside your overall financial plan and you’ll be well on your way to achieving your life and financial dreams. Take control -- your professional advisor can provide the perspective you need to succeed. This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial Services Firm), presents general information only and is not a solicitation to buy or sell any investments. Contact a financial advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.