These days it can seem like there's a tax on everything and with Canada's progressive tax system the more income you earn the higher your tax rate.
If you face a high tax burden, you'll be interested in how you can reduce it or at least manage it.
One way is with insurance.
Most people think of insurance for their home, their Auto and life.
But did you know that life insurance can help cover the taxes due when your estate is settled?
What's more there are Insurance based investment strategies that can provide tax free income during your retirement and tax-free benefits to the beneficiaries of your Estate.
Another way is with family income splitting.
Family income splitting involves transferring investment income that would otherwise be taxed at your higher tax rate to family members who are taxed at lower rates.
Here are two additional ways to split income with your family.
One, a family trust which enables you to provide funds for your children or grandchildren’s needs while reducing taxes.
Two, a spousal loan strategy which enables your lower income spouse to earn investment income at their lower tax rate.
Here's some other ways to reduce tax.
If you have an RRSP contribute as much as you can to maximize the tax deferred growth over time.
Also take advantage of the tax free savings account if you haven't done so already to earn tax-free investment income.
Next look at your non-registered savings and how the different types of investments are taxed.
Capital gains and dividends from Canadian corporations received preferential tax treatment while interest income from GICs or bonds is fully taxable at your marginal rate.
Here's a tip - put more of your interest-bearing investments in your registered accounts like your RRSP where they are sheltered from taxes, then put more of your taxed advantage dividend-paying investments into your non registered accounts.
And here's one more tip.
Always make sure you speak with a qualified professional tax advisor to get the right tax advice for you.
This video is provided by RBC Wealth Management for informational purposes only. The comments contained in this video are general in nature, and do not constitute legal, investment, trust, estate, accounting or tax advice. RBC Dominion Securities Inc.*, Royal Trust Corporation of Canada, The Royal Trust Company, RBC PH&N Investment Counsel Inc., RBC Wealth Management Financial Services Inc. are affiliated corporate entities and member companies of RBC Wealth Management, a business segment of Royal Bank of Canada. *Member – Canadian Investor Protection Fund. Please visit www.rbc.com/legal/ for further information on the entities that are member companies of RBC Wealth Management. ®/TM Trademark(s) of Royal Bank of Canada. Used under license. © 2021 Royal Bank of Canada. All rights reserved.
