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Yes – contributing to your RRSPs is very important to your retirement plan because it helps lower your taxable income, and your wealth increases exponentially over time through tax-deferred compound growth the longer you’re invested.

While you can wait for the RRSP deadline every year to make your annual contribution, you can actually increase your investment returns by making contributions earlier in the year.

If you start contributing to your RRSP annually on January 1, it provides more time for your money to grow, which makes a significant difference on your retirement savings. You can also contribute monthly if your budget doesn’t allow for one lump sum contribution at the beginning of the year.

While every business has different tax-planning needs, there are a number of ways you can save on taxes for your business:

Employ your spouse or children
Consider paying them a reasonable salary for the services they perform for the business. The money you pay them will likely be taxed at a much lower rate, and it keeps the money in your family.

Incorporate your business
Depending on the level of your current business revenue, and whether your business generates more income than you need for personal lifestyle costs, it may make more sense to incorporate your business.
Profits would be taxed at a much lower corporate tax rate, and you would only be taxed personally for cash you actually need. Whereas if you operated as a proprietor or as a partner, you get taxed on all business profits, whether you need all of the income generated or not.

Invest excess cash
The biggest bang for your tax dollar is accomplished by leaving profits in the company. If paying down debt or reinvesting in the business are not options for you, then a smart investment plan may be the next best thing.

Parson & Associates can help you navigate this process.

While no one can guarantee how the future will unfold, it’s always best to have a solid plan in place so you can avoid potential hassles in your business down the road.
Some of the steps you can take, include:

Business overhead disability insurance – Covers business expenses related to salaries, rent, utilities, taxes, etc.

Income replacement disability insurance – Covers personal expenses

Critical illness insurance – A tax-free lump sum that you can use any way you wish.

Parson & Associates can help you figure out which options make sense for your business.

It is usually recommended that you start the process by taking an inventory of your assets so that you have a clear picture of what may be in your estate. Parson & Associates can help you project what the after-tax value of your estate may be.

If you don’t have a customized estate plan that aligns with your whole financial picture, your assets may be distributed in a manner you didn’t anticipate.

Your estate plan will encompass more than just your will – it could include a review of your beneficiary designations, joint ownership arrangements and powers of attorney.

To assist your loved ones in the event you pass away, you should include these items in your list of personal records:

• People to contact (e.g. next of kin, executor, employer, lawyer, etc.)
• Estate documents (e.g. financial decisions, funeral arrangements, will, organ donation, etc.)
• Your personal details (e.g. personal data, digital assets like online accounts, citizenship papers, marriage/divorce certificates, club/association memberships, military service, etc.)
• Financial Commitments (e.g. rent/mortgage payments, outstanding loans and lines of credit, credit cards etc.)
• Insurance (e.g. life, disability, critical illness, hospital, etc.)
• Investments (e.g. mutual funds, annuities, GICs, etc.)
• Residence and real estate (e.g. where they are located, who owns the title, etc.)

You can call us to get a copy of our Personal Records Organizer to help organize information about your personal and financial affairs. It will be extremely valuable to your family and estate administrators in the event you were to pass away.

Spousal RRSP contributions are a great way for a higher-income spouse to lower their taxable income by using the tax deduction for the contribution today, while ultimately providing the lower-income spouse with retirement income in the future, but at what is hopefully a lower marginal tax rate than the contributor.

Spousal RRSP may be useful to you in a few circumstances, for example if:

• You anticipate retiring before age 65 (since RRIF income does not qualify for pension income splitting until age 65); or
• You have a spouse who is no more than age 71 at the end of the year, you have available contribution room and you want to make RRSP contributions past age 71

You can effectively reduce your tax bill by taking advantage of all the tax deductions and credits that you’re entitled to every year.

Federal tax deductions include (but aren’t limited to) the following:

• RRSP contributions
• Spousal support payments
• Deductible interest charges on loans used to earn income from a business or property
• Union and professional dues
• Contributions to a company pension plan
• Certain moving expenses
• Expenses related to self-employment
• Child care expenses

Federal non-refundable tax credits include (but aren’t limited to) the following:

• Medical expenses (TIP: pool your family medical expenses on the lower income spouse’s tax return)
• Charitable donations (TIP: pool the donations you and your spouse made in the year, or carry them forward up to 5 yrs)

Generally, no. While capital gains tax must always be paid whenever you liquidate an investment for more than you paid for it, your principal residence can be 100% exempt from capital gains tax no matter how much it has appreciated over the years.

For tax purposes, almost any type of dwelling can qualify as a principal residence – from your home in the city to a vacation property such as a cottage, mobile home, or houseboat – even if it’s only lived in for part of each year.

If you have multiple properties that qualify for the exemption, you will have to decide which property you wish to designate as your principal residence for every year that you own both.

You can specify how many years that each property would be your principal residence. But just remember that you’ll have to pay capital gains tax on any other properties that have appreciated over that same time period, for the years you are not designating them for the exemption.

While the easiest and most obvious answer is peace of mind, life insurance plays an important role for a number of reasons.

For your family, it can let them:

• Stay in the family home
• Not have to change neighbourhoods or schools
• Stay involved with activities
• Attend post-secondary school

It can also help by:

• Ensuring your business can continue
• Supporting causes you care about
• Ensuring your legacy can live on
• Minimizing taxes paid by your estate after you pass away

The real answer is that no one really knows your situation better than you do. Parson & Associates will work with you to determine what your next steps might be and review your situation in terms of which insurance options work best with you and help you build a plan to protect what matters most.