Tax saving tips posts

Income Tax Explained: Know What You Owe, and Pay Less

Having someone else do your taxes for you, or getting that help from a prepared software package, can remove the opportunity to better understand how your income is taxed. I will readily admit that, were it not for my job, I would almost certainly fall into this group. (Basic math is not my forte, to put it mildly.)

That said, it's worth putting the effort in to understand where your income comes from, and how each different source of income is taxed - not all income is generated in the same way, and it's not all taxed at the same rate either. Understanding even the basic differences between tax deductible and tax deferred, or the difference between investment income, and your employment income, could help you save a great deal of money over time.

Tags: Ernst & Young, Finance, Registered Retirement Savings Plan, RRSP, tax saving tips, tax savings, Tax-Free Savings Account, taxes, TaxSavings, TaxSavingTips, TFSA

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Tax-Free Savings Accounts: What Are They Good For?

by Terry Fong

Filed under: Retirement and RRSPs, Taxes

The tax-free savings account (TFSA) was introduced by the Conservative government in time for the 2009 calendar year. A recent poll showed that fewer than 25 per cent of Canadians have opened one.

So what are they? A TFSA has some similarities to a Registered Retirement Savings Plan (RRSP). Both are tax shelters and the same types of accounts and investments can be used in both. The major difference lies in tax treatment, and how much you can put in.

RRSPs were designed for retirement and will defer income. Any amount you put in reduces your income for tax purposes, but becomes income when you pull it out. A TFSA has no such advantage. However, any income made by investments in the TSFA plan – whether interest, dividends or capital gains are not taxed while within the account. Although TFSAs are being marketed as tax-free savings tools, at current rates there's not much point in just leaving the money to accrue tax-free interest. Their main advantage lies in being able to make money by investing the money in them, without paying taxes until you withdraw.

Tags: capital, Dividends, Tax saving tips, TaxSavings

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