Some timely tax tips

January 28, 2008
Written by Mike Veldhuizen
As the end of the year quickly approaches, it is time to once again reflect on your financial position, and what you can do to improve your situation by reducing taxes payable, whether you are an individual taxpayer or an owner of an incorporated greenhouse operation.
As the end of the year quickly approaches, it is time to once again reflect on your financial position, and what you can do to improve your situation by reducing taxes payable, whether you are an individual taxpayer or an owner of an incorporated greenhouse operation.

There are many ways to pay less tax if some planning is done ahead of time. The balance of this article discusses several things that one should consider now to help reduce your tax burden when the end of the year arrives.

Cash basis taxpayers – Unlike most businesses, greenhouse operations and other farming enterprises enjoy the benefit of being able to report their income using the cash method. By using cash basis of accounting for tax purposes, a greenhouse operator only has to report income that was received during the year, instead of the income that was earned during the year. In addition, it means that you may only deduct expenses, including wages, which have been paid during the year. Accordingly, to maximize your deductions, you should pay as much of your accounts payable as possible by year-end. You may also consider buying inventory or other supplies for the upcoming year so that the deductions can be taken in the current year. Finally, if your operations are carried on in a corporation, you should pay bonuses before the end of the year in order to reduce the corporation’s income to the small business deduction limit ($400,000 for 2007) to avoid paying tax at the high corporate tax rates.

RRSPs – As long as you have contribution room available, you can put money into either your own or a spousal RRSP, and receive a tax deduction for the amount you invest. Although the money will be taxable when you receive the amounts in retirement, you will have had the chance to invest the taxes you saved in order to grow your investments. Additionally, it’s likely that you will be in a lower tax bracket during retirement than during the years you work, which means you will pay less tax overall on the amount you invest into your RRSP. As of 2007, the conversion age for RRSPs into a registered retirement income fund (RRIF) increases from 69 to 71.

Children’s fitness credit – Starting this year, you will be able to claim a credit for amounts paid to register your child under the age of 16 in a fitness program, to a maximum of $500 per year for each child. Qualifying programs must be ongoing, supervised and involve physical activity in order to qualify. Make sure to keep your receipts in order to support your claim for the credit.

Pension splitting – Beginning in 2007, pensioners will be able to “split” certain types of pension income with their spouse. This will allow a taxpayer in a higher tax bracket to designate up to 50 per cent of their income to their lower tax bracket spouse to reduce the overall tax paid by the couple. Qualifying pension income is dependent on your age.

Donations – If you are thinking about making a donation to a charity, you need to make your donation by Dec. 31. You should consider making a donation of publicly traded shares or mutual funds. As of 2006, if you donate publicly traded shares to a charity, you will not have to pay tax on any capital gains and you will also receive a charitable donation credit for the actual value of the shares donated. This can be a win-win strategy for both you and the charity.

The preceding items represent a short list of some of the ways you can minimize taxes. Other options may be available to you, depending on your situation. If you think some of these deductions may be available to you or you have questions about your tax return in general, you should contact a tax practitioner.

Mike Veldhuizen is a tax manager with the Niagara office of Deloitte. • 905-323-6015, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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