New Year, New Tax Season
Tax season is coming... This is the season I used to hear about, barely care unless I knew there was a return expected. This year no more. I will not be going to HR Block, I will be handling things myself.
When preparing for my taxes in yesteryear I would only have my T4 slip handy and that would be the end of it. However, this last year since I have taken steps into investing, I will have to have a few more handy.
There are many different slip that will apply:
T5: It is a slip that outlines all the investment income for the year
T3: It is a statement of trust income and allocations. It is issued in my case because of one of the portfolio I hold has some assets from business income trusts.
T5008: This one reports the amount paid or credited to you for securities you sold during the year.
As far as the tax planning strategy, I intend to maximize on all tax saving tricks that I haven't done during earlier years.
First thing I had done to save myself from next year's trouble, I have setup a TFSA, which essentially doesn't save me from my taxes; because, well, the amount you put in is already taxed but everything earned won't be taxed. This is a mistake I made whereby, I opened mutual funds, and different other portfolios without forethought. The result is that I, now, find myself with T5s and T3s that will come my way, which I could have avoided.
However, most importantly I have set up RRSPs. These I will fund as much as I can. I don't make that much, but whatever I can do to lower my tax bracket and save myself the taxes I will do. But and this is a big but, I am planning on putting enough in the RRSP to hit the threshold whereby I will be issued a refund. This will be without maximizing my room for contribution. The reason being that, I may not need it now, but If I succeed in increasing my income next year, I will require all the room necessary in order to offset the increase. I will be investing the refund in a TFSA. Furthermore, I will start the simulation on Ufile.ca, since we still have some time (60 days into the new year) to make the contributions.
Tax planning shouldn't be taken lightly, I remember at University, there was a professor that said that if you get a tax refund, you essentially lent the government money and interest free at that. I will no longer be happy if I have a refund. So don't be excited if you get a refund, that money was yours to begin with and had you kept it and invested it during the course of the year, even in a traditional savings account you could have had around 1.25% interest on it.