Tip # 1 - Salary versus Dividends - To maximize the availability of after-tax funds and minimize total corporate and personal tax, an owner/manager should consider the appropriate mix of salary and dividends to receive as compensation. Although the tax system is designed to extract approximately the same combined corporate and personal tax dollars regardless of any salary and dividend mix, perfect integration does not always occur. No two situations are identical and the optimum combination of salary and dividends can only be determined on an individual basis.
Tip # 2 - Temporary work assignment - Self-employment might also exist in circumstances where a worker is hired through an agency for various temporary assignments. Under this scenario the individual may be entitled various deduction related to his or her self employment status.
Tip # 3 - home office deductions - If required by your employer to work at home after business hours, deductions might be available in certain instances if employment after hours is considered by an employer and/or union to constitute a separate working arrangement. If the employees and employers have agreed that the employees are to provide their own working environment. If the qualified workspace is in the employees’ homes, the employees may be allowed a pro-rata deduction for rent paid, maintenance, utilities and minor repairs. Expenses related to mortgage interest, property taxes and insurance may not be deducted (unless, in the case of property taxes and home-insurance premiums, they are related to commission sales expenses). To the extent that a claim for workspace in the home exceeds employment income, that portion of the deduction is denied in the current year; however, it may be carried forward indefinitely against future income resulting from the same employment.
Tip # 4 - Dividend income for Family Member - Consider introducing family members as officers or shareholders so that they may participate in dividend income, even if no direct involvement in operations was present to justify salaries
Tip # 5 - Child care expenses - The child-care portion of fees paid to a private school that provides both educational and child-care services (such as before or after-class supervision) might also be deductible as child-care expenses
Tip # 6 - Moving Expenses - Taxpayers may claim eligible moving expenses to change residences within Canada, provided the move brings them at least 40 kilometres closer (i.e., using the shortest normal route) to a new job, business location in Canada or post-secondary institution at which they enter full-time attendance. However you do not necessarily need to have a job at your new location to become eligible to deduct moving expenses against earned income when you eventually find and begin work within a reasonable period of time. An example of this could be where a taxpayer moves from one geographic location to another in Canada where employment opportunities are better.
Tip # 7 - Income Splitting - If you earn more than your spouse, you could reduce your family’s combined tax bill by paying your spouse’s expenses, thus allowing him or her to save some money for investment purposes. The income and gains from these investments would then be taxed in your spouse’s hands at a lower tax rate. This strategy will also help you even out future retirement income if you have been able to invest in a tax-deferred retirement plan and your spouse has not.
Tip # 8 - Income from RESP - Former students may still be able to receive income from their RESP for a brief period after leaving school. A beneficiary is entitled to receive EAPs for up to six months after ceasing enrolment, provided the payments would have qualified as EAPs if made immediately before the student’s enrolment ceased.
Tip # 9 - RRSP Contribution - If you are an employee who is making regular RRSP contributions, request that the amount of income tax withheld on your paycheque be reduced in order to reflect the savings those contributions will bring. This is a more efficient way to manage your money than overpaying tax up front, then waiting for a refund the following year.
Tip # 10 - Extracurricular classes for Children - Fees for your child’s extracurricular classes may also be eligible for the tuition credit if your child is at least 16; the classes are taken through a certified educational institution in Canada; and the program provides occupational skills. Dance or skating lessons are examples of classes that might qualify.