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 4 Ways to Save Money On Taxes

August 8, 2022 Andrew AdolphAudits

Most people don’t how to save money on taxes. But luckily, you won’t be most people after reading this. It’s actually quite simple…

 

How to Save Money On Taxes Featured Image

Start a Business

 

 The traditional lifestyle is to go to work for someone else, have a portion of your pay withheld, and hopefully get a small refund at tax time. That is not the way to save money on taxes.

 

These people work 5 days a week, with about 1.5 of those days being used to pay for the privilege of working in that position. When it comes to filing their income tax, they often pay someone to do it. Did you know that if you have a business, you can actually write things like that off as a business expense?

 

Advantages to Having a Business

 

When you own a business, you can save money on taxes and decrease your personal living costs by claiming certain hybrid expenses as legitimate business expenses.

It also opens the door to better the average income taxes in your family instead of just one person being in a high tax bracket. This is known as income splitting.

Losses during your business startup can be written off against other sources of income. You can also stop making interest-free loans to the government year after year. By owning a business, you gain some control of your finances now that it’s all about cash flow projection.

 

Some Drawbacks

 

Besides the fact that you actually have to own a business to save money on taxes, there are some other complications you may encounter.

The CRA will definitely be keeping a closer eye on you. Your chances of getting audited skyrocket when you own a business. Especially when you start claiming things as business expenses. 

Just remember that all claimed business expenses must relate to the income you earn and be reasonable. If you want to learn more about business expenses, click this link here to my business write-offs blog. I cover everything you can and cannot do in detail. 

 

RRSP

RRSP stands for Registered Retirement Savings Plan.  There is a tax deduction when you pay into this plan and a reduced income tax rate when you eventually pull from it. The ability to invest more money now and take advantage of it later is a really great choice. One of the principles of tax saving is to delay taxes in future years when money is worth less.

TFSA

TFSA stands for Tax-Free Savings Account. A TFSA is like a piggybank whose earnings are tax-free. There are limits to how much you can put into them though. But in my opinion, it’s still one of the best ways to save money on taxes. To learn more about the TFSA click here.

 

File On Time, Save Money on Taxes

 

Whatever you do, never try to run from your taxes or try to fool the CRA. Even if you cannot pay, file your income tax returns on time. The government rewards subservience. 

     

Other Ways to Save Money on Taxes

 

Tax filing software will interview you about your personal situation and find most tax deductions. Tax software such as TurboTax will work just fine if you’re operating a small business. Otherwise, I’d recommend hiring a tax professional.

 

Bottom Line

Hiring a tax audit accountant or CPA bookkeeper can significantly help you keep track of your business’s financial position. Knowing your numbers allows you to maximize savings and profitable opportunities and avoid costly mistakes long term.

Are you a small business owner or freelancer looking to grow and sustain your business?

To book a free meeting call 604-240-6173 or email me at andrew@gatewaytax.ca. I can answer any financial or tax-related questions and help you set a profitable financial plan. You can also visit the Blog for additional tax-related resources.

 

 

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Andrew Adolph

Andrew Adolph is a CPA and former CRA auditor with 25 Years of experience. He helps businesses to not par any more in sales taxs than the law says they must and acts as an advocate for you if you are being audited, so you can fous on your business.