Income taxes are the biggest expense for most Canadian. If you have your own business or professional corporation, your company can help generate tax savings to accelerate your mortgage repayment or boost your retirement savings.
Use Capital Gains Instead of Dividends
If you are planning large cash withdrawals from your company, consider taking the cash as capital gains rather than dividends. Only one half of the capital gains is subject to tax.
Set Up Corporate Health Plan
You can get 45% discount on your medical expenses by setting up your own Private Health Services Plan. It allows your corporation to deduct dental and medical expenses for yourself and family members without any corresponding taxable benefit to you.
Split Income With Family Members
The corporate tax rate is around 10% (depending on your province), compared to the highest personal tax bracket of around 40%. Tax saving can be enormous by channelling corporate income to family members in a lower tax bracket, instead of paying all the income to you alone.
Maximize Deductible Pension Contributions
Consider swithing your retirement savings to an Individual Pension Plan (IPP), instead of the RRSP. You can make larger contributions to an IPP than to the RRSP, especially if you are over 50 and you are also entitled to a large tax deduction for past service contribution.
Deduct Mortgage Interest
If you have a sizable house mortgage, you should look for creative ways to write off the mortgage interest.