Five ways to kickstart a year of tax savings

National Post


With 2015 just underway, here are five things you can do this week to kickstart a full year of tax savings.

Make your 2015 RRSP contribution

Sure, we all know that the RRSP deadline isn’t until March 2 (the normal March 1 deadline falls on a Sunday this year so we are given an extra day), but that deadline is only really relevant for procrastinators. In other words, the RRSP deadline is the last day to contribute to your RRSP to claim a deduction on your 2014 tax return, to be filed this spring.

But, if you want to stay ahead of the game and have the funds to do so, why not make your 2015 contribution right now and enjoy a full 14 months of tax-free earnings and growth.

The amount you can contribute for 2015 is based on 18% of your “earned income” from 2014, which generally includes employment, business and net rental income, less any pension adjustment if you were part of an employer sponsored pension plan. The maximum for 2015 is capped at $24,930 which occurs once your earned income reaches $138,500.

Contribute another $5,500 to a TFSA

The new year brings another $5,500 of contribution room to your TFSA, upping the total lifetime cumulative limit to $36,500. If you’ve yet to open up a TFSA, what are you waiting for? After all, there is really no reason anyone should have anything invested in a non-registered account if you haven’t maximized your cumulative TFSA contributions.

If you’ve got minor kids, consider making your 2015 registered education savings plan (RESP) contributions. By contributing at least $2,500 for each child, you can take advantage of the 20% matching Canada Education Savings Grant (CESG). If you are catching up and trying to collect prior years’ CESGs, consider contributing $5,000 per child to the RESP so you can collect the annual maximum of $1,000 in CESGs per child.

Collect the 2015 RDSP Grants and Bonds

If you are saving for someone in the family who qualifies for the disability tax credit and is under 60 years of age, then contribute to a registered disability savings plan (RDSP). Not only can up to $200,000 of contributions grow tax-deferred, but, if the beneficiary is under 50, the RDSP may be entitled to receive up to $3,500 of Canada Disability Savings Grants (with a $70,000 lifetime maximum) and an additional $1,000 in Canada Disability Savings Bonds (with a lifetime maximum of $20,000).

Avoid a tax refund for 2015

Finally, if you regularly look forward to a large tax refund each year, it’s a sign that your employer may be taking off too much tax at source. You have two options.

The first one is to update your Form TD1 “Personal Tax Credits Return” which is filed with your employer and lists the various credits which should be taken into account annually. Your second option is to complete CRA Form T1213, “Request to Reduce Tax Deductions at Source” in which you list the various deductions that you plan to take when you file your 2015 return, such as your RRSP contribution, support payments, interest on money borrowed for investment or business purposes or childcare expenses. Mail it to the CRA, and, once it’s approved, you will receive back a formal authorization letter which you submit to your employer authorizing it to reduce the amount of tax withheld at source from each paycheque in 2015.