4 Canadian Tax Shelters You Need to Know

For many of our clients, the financial focus is usually around saving money and paying less in taxes; while you may be aware of the traditional ways they can minimize your tax exposure, youʼre likely not aware of one of the best Canadian tax shelter …

1. Your Home
• Annual growth on your home accumulates tax-free
• Access to equity in the home is tax-free
• Can be passed on at time of death (to anyone) tax-free
• Capital gain on the sale of your principal residence is tax-free
• Canʼt claim the investment or mortgage payments as a tax-deductible expense

2. RRSPʼs
• Your contribution is tax-deductible
• Annual growth on RRSPʼs accumulates tax-free
• At death, can be passed on to your spouse tax-free
• Any withdrawals are taxable
• RRSPʼs must start withdrawl at age 71 (whether needed or not)
• Lifetime maximum contribution of $1 million
• At death, if not transferred to spouse, approximately 50% taxable
• Shown as earned income, which can cause old age security clawback

3. TFSAʼs
• Any withdrawals are tax-free
• Annual growth on TFSAʼs accumulates tax-free
• Can be passed on to a beneficiary tax-free
• Maximum annual maximum contribution of $5500
• Maximum lifetime contribution of $46,000

4. Corporate-Owned Life Insurance
Most people donʼt think of life insurance as more than a death benefit, nor do they know that under CRA rules, it makes for one of the best tax shelters. And for business owners, unlike the previous three options, the investment can be held inside your corporation and if you need access to the funds for lifestyle and retirement, the funds can be accessed indirectly from the corporation, tax-free.
• Annual growth accumulates tax-free
• Withdrawals are tax-free (indirectly from your corporation)
• Can be passed on to a beneficiary tax-free
• Maximum annual contribution of $4.5 million
• Liquid: you can access up to 90% of the investment value
• The investment value will not reduce in value, regardless of market conditions
• The deposits can be financed (minimum deposit of $30K annually)
• The insured must qualify for the insurance medically

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