If you're hoping to reduce your taxes owed next year, Caskey offers the following tips:
- Take a year-round approach to tax savings: Reviewing your asset allocation with your advisor throughout the year may help ensure your investments are allocated to maximize tax efficiency. Consider contributing to your RSP regularly throughout the year, instead of making a lump-sum contribution, to take advantage of compound interest.
- Invest efficiently outside RSPs/TFSAs: With your advisor, determine an appropriate asset mix and consider investment solutions based on their tax efficiency. For example, Return of Capital distributions may be received tax-free, but they reduce the adjusted cost base of the investment. Also keep in mind that capital gains are taxed at half the rate of interest income.
- Plan not to get a tax refund in the first place: If you are getting a large tax refund, that means you are overpaying! Consider making regular contributions to your RSP or speak with your advisor about strategies to ensure you're being tax efficient.