Proper tax planning ensures you pay the lowest rate of tax available to you. Tax deductions and Tax credits will help you achieve this.
The money you earn may not all be taxable. Deductions have the greatest effect on your ovrall tax rate. They work on bringing down the top line of our return, where the tax rate is the highest.
Some typical tax deductions are:
-Child care expenses
-Northern Residence Allowance
-Flow through shares
-Capital gains deduction
Once your deductions have been applied to bring your top line income down, and therefore your overall tax, then credits help you pay the tax. Tax credits are applied to amounts that you would have to otherwise pay.
Some typical credits are:
-Eligible dependents for single parents
-Canada employment amount for everyone that gets a T4 Slip
-Tuition and education credits for self, spouse, or some other family members
-Transfer of unused credits from a spouse
-Child Fitness tax credit
-Children’s Arts Tax Credit
-Volunteer Firefighter Tax Credit
-Family Caregiver Tax Credit