It’s time to review your 2019 income tax strategy prior to year-end so that you are ready for tax time. Seize the opportunity to optimize your income and lower the amount of taxes to be paid. To do this (other than for an RRSP), you need to act before year-end!
If you had only one employer this year, then calculate your income as the yearly amount earned from your most recent pay stub. If you are still expecting one last pay stub before year-end then estimate the additional income from that cheque. Then add it to the amount from your second last cheque.
Your gross taxable income is the total amount earned plus any taxable benefits you may have earned this year. Knowing this gross income, you can estimate if you may need to look at further expenses to offset this income total. If there is something you can take into 2019 as an expense, you still have a few days before December 31.
If You Have a Side Hustle
In your income tax strategy consider the fact that you may be an employee and an entrepreneur at the same time. A side hustle is now considered a way of life for those who want to pursue their own endeavors. If this is the case, and you contract your services or have a small business, then you are a proprietorship earner. Entrepreneurial income is included in the same personal income tax form. BUT, as an entrepreneur, you are allowed many deductions against earned income. Be sure to save all receipts and apply them to the income earned as an entrepreneur.
Most Canadians know that RRSPs offset income in the current tax year. Now maybe the right time to determine how much you may want to contribute for the 2019 year. Your Notice of Assessment (NOA) from last year’s tax return has the maximum available RRSP room you are allowed to contribute. You CAN wait until late February 2020 to buy RRSPs that would apply to the year 2019, but why wait?
If your Income is Less than $45,000
To complete your income tax strategy, it is really wise to ask a financial advisor for advice on whether you need to buy these RRSPs in the first place as you may end up paying far more tax than you save – especially if your income is below $45,000.
The banks promote RRSPs heavily in February to anyone who comes up to the wickets. I was asked if I wanted to buy one last year, even though I am over the maximum age (71) for even having one. The bank tellers are told to promote RRSPs and set up appointments with the licensed advisors at the bank.
Banks are in the business to making a profit for their shareholders. Do you think they can also have your best interests in mind as clients?
As a final note, in your income tax strategy be sure to lock in your financial losses on any investments by selling them now to take the tax loss this year. This would be losses on investments, business losses from an individual partnership, and your proprietorship losses if you haven’t captured them in the past. This loss record is maintained ongoing within the CRA and can offset income taxes owning now and in the future.
If you would like more information I would be happy to have a chat on my experiences in this area. To book an appointment, https://cadillacwealthmgmt.com