Think tax season is over? Well, I think it’s just beginning.
While most Canadians think of tax season concluding with the April 30 filing deadline that just passed this week, keep in mind that this date only marks the due date for submitting your 2012 tax return.
But if we take a more holistic approach to tax planning, it should be something we take seriously all year round – not just once a year when it comes time to file our returns. But, where to begin?
I think it’s worthwhile taking a fresh look at your 2012 return this spring, not to see what’s there but rather to see what’s not there. All those empty lines represent potential missed opportunities for tax savings, beginning on page two with the calculation of your total income.
For example, do you have anything on line 120, “Taxable amount of dividends?” If not, you are missing out on the opportunity to earn tax-preferred Canadian dividend income in your non-registered portfolio. Take an Ontario investor making $75,000 per year, before taking into account any investment income. If she earned $2,000 annually in interest income, her marginal tax rate on that incremental $2,000 would be 33% costing her $660 in additional tax. If, on the other hand, that $2,000 was in the form of eligible Canadian dividends, perhaps from owning shares in a blue chip company, either directly or through a mutual fund, those dividends would be taxed at marginal rate of only 14% resulting in an incremental tax bill of only $280. That represents a savings of more than 55% over interest income.
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