If you’re like most Canadians, taxes take a big bite out of your wallet every year. And once you have retired, taxes can have an even bigger impact on your financial picture.
Fortunately, there are a few ways to save on taxes and keep more of your hard-earned money.
Optimize your pension tax credit. It doesn’t carry over – use it or lose it.
If you are over 65 but not yet 71 years old, you will need to convert some of your RRSP investments to a RRIF in order to take advantage of this tax credit.
Consider spousal RRSP contributions. If you are 71 years of age or older and your spouse is under the age of 71, you may want to contribute to a spousal RRSP, which offers the same tax savings as a regular RRSP.
Give to charity. Charitable donations made by December 31 are eligible for this tax year.
Take advantage of a tax-free savings account. TFSAs allow you to grow your investments tax-free.
You can contribute up to $6,500 in 2023 and up to $81,500 in total.
Split your pension income. Transfer up to 50% of qualifying pension earnings to a lower income earning spouse or common-law partner, which will then be taxed at their lower income tax rate.
Consider the multigenerational home renovation tax credit.
Starting in 2023, a refundable tax credit of up to $7,500 is available for families who construct a secondary suite for seniors in their home. Rather than benefiting the retiree directly, this would benefit the homeowner, likely an adult child.
Submitted by Paul Arsenault, Wealth and Investments Kindred Credit Union