It’s like our shadow, always right there behind you. We pay tax on everything, things we buy, services we receive and income we produce. Although there is very little we can do about the first two there are strategies to reduce the latter. First we need to understand the tax system, many of use get taxes deducted but we don’t understand how it works.
In Canada we have a progressive tax system. What does that mean? In simple terms it means the more you make the more you pay. We pay federal tax, the same across the whole country, as well as provincial tax. Here is the Federal tax brackets for 2008:
· 15% on the first $37,885 of taxable income,
· 22% on the next $37,884 of taxable income
· 26% on the next $47,415
· 29% of taxable income over $123,184
Ontario tax bracket for 2008:
6.05% on the first $36,020 of taxable income
9.15% on the next $36,021,
11.16% on the amount over $72,041
There is also a $8,681 personal tax allowance that we don’t pay tax on.
Visit the Walter Harder & Associates income tax calculator for an estimate of your taxes. There are several methods of reducing your income tax, which I will discuss in other articles. Some common strategies are: RRSP’s, Donations, Charitable givings, Levering and home based business. If you have dependents you can deducted certain items.
If you would like further information on these strategies, feel free to contact me.
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