Fifteen ways to reduce your 2007 taxes
1. Contribute to your RRSP
Your maximum contribution for 2007 is 18% of income earned in 2006, principally from employment or a business, up to a maximum of $19,000 (compared to $18,000 in 2006). The maximum RRSP contribution for 2007 applies to earned income of $105,556 in 2006. To find out the exact amount that you can contribute, look at the “RRSP Deduction Limit Statement for 2007” section of your federal assessment notice for 2006. Be careful of over contributions. The law allows you to contribute up to $2,000 over the authorized maximum in your RRSP. Do not exceed this limit, because the penalty of 1% per month on over contributions can add up fast, and the administrative formalities to recover excess contributions are relatively complex. Since the Canada Revenue Agency (CRA) has begun paying much closer attention to over contributions, do not expect them to go unnoticed. If you turn (ed) 69, 70 or 71 in 2007. The 2007 federal budget changed the age limit for contributing to an RRSP from 69 to 71. Should you continue to contribute to a spousal RRSP? Under current tax legislation, taxpayers who receive pension income can split this income with their spouse when filing their 2007 tax return.
Did you make any donations in 2007? The federal credit is equal to 15.5% of the first $200 of charitable donations paid in the year and 29% for any donation in excess of $200 (12.94% and 24.22%, respectively for Quebec residents).
3. Take advantage of the reduced tax rate on eligible dividends
4. Claim the $750,000 capital gains deduction
Small business corporation shares, qualified farm property, and qualified fishing property (including, for qualified agricultural and fishing properties, shares of a corporation and partnership interests) qualify for the lifetime capital gains deduction of $750,000 ($500,000 for shares disposed of before March 19, 2007).
5. Stagger taxation of certain capital gains
If you dispose of property on which you realize a capital gain, you can stagger the taxation of this gain over up to five years if you allow the purchaser to stagger the payment of the proceeds from the sale over at least a five year period as well.
6. Defer tax on certain stock option benefits
7. Use your capital losses
8. Offset taxable income with an allowable business investment loss
9. Repay shareholder loans
10. Pay a bonus
11. Check whether interest on your loans is deductible
12. Have you made certain disbursements before the end of the year
Some deductions and credits can only be claimed if the amount was disbursed before the end of 2007. This is the case for charitable donations, child support (if deductible), childcare expenses, interest on loans for investment purposes, tuition fees, and union and professional dues.
13. Contribute to a registered education savings plan
14. Have you made your last installment
15. Keep your transit passes
Individuals can claim a non-refundable tax credit for monthly or longer-duration public transit passes in their federal tax return. The 2007 federal budget also included a tax credit for weekly transit passes that are valid after 2006, provided that the taxpayer purchases at least four consecutive passes. The budget also includes measures to make electronic payment cards issued after 2006 eligible for the tax credit, provided that certain conditions are met.