1) Contribute to your RRSP.
Making a contribution to your Registered Retirement Savings Plan (RRSP) is one of the fastest and easiest ways to reduce the amount of income tax you have to pay. Check your Notice of Assessment or Notice of Reassessment from the Canada Revenue Agency for 2011 to find your RRSP deduction limit for 2012.
If you turned 71 in 2012, you may still make RRSP contributions until December 31st.
The deadline for RRSP contributions for the 2012 tax year is Friday, March 1, 2013. But the sooner you make your contribution, the sooner the interest can start piling up on your money.
2) Give to charity.
Up to seventy-five percent of your net income can be claimed as donations and making charitable donations is quick and easy, and makes you feel good. You can only make donations to charities and other organizations that have the Canada Revenue Agency’s stamp of approval but the list is long.
To maximize your charitable donations, you’ll want to donate more than $200; when your donations total more than $200, you get more of a tax credit for them. You can have one spouse claim all of the charitable deductions made by both spouses to maximize your charitable donation tax credits if you wish.
3) Split your income with your spouse.
Splitting your income with your spouse reduces your income tax by reducing your taxable income. It’s an especially useful tax strategy when one spouse, who has a higher income than the other, is able to use it to reduce his marginal tax rate.
You might split your income by lending money to your spouse, splitting your pension income, or, if you have a business, employing your spouse.