The biggest mistake many people make is to wait until April to concern themselves with their taxes.
Throughout the year there are many financial decisions that can be made that could significantly impact the amount of taxes owed. The Act is full of income exclusion rules, key tax credits, retirement plan contribution options, and investment rules that are easy to miss or miscalculated without the organization and foresight that tax planning provides.
Tax rules change nearly every year and because these changes usually affect such important things as exclusion amounts, credit eligibility, retirement plan contribution limits, and the tax rates themselves, they will almost certainly affect spending, saving, investment and borrowing decisions made throughout the year.
At its core, tax planning is the process of organizing your finances in such a way to take advantage of the many rules that allow you to maximize the amount of income you keep each year or defer into the future. While the process is essentially the same for any taxpayer, it may entail different types of tax strategies depending on your particular financial situation. Strategies for deferring or splitting income, deferring or maximizing retirement contributions, capital gains or losses, property ownership, charitable giving are applied differently in each situation, so they must be developed specific to your needs.
Tax planning and tax strategies involve the application of the rules and provisions of the Income Tax Act, which is voluminous and in a constant state of change. Because their effective application can result in hundreds or even thousands of dollars of tax savings each year, it is strongly recommended that you seek the guidance of a financial professional with experience in income and investment planning strategies for minimizing personal income taxes.
Call our office today, if you have questions about your own tax strategy.