As any savvy investor knows, with careful year-round tax planning one’s investment portfolio can be a great source of tax savings.
Income deferral vehicles such as the RRSP can be used to delay triggering taxes until a point in time when taxable income is lower.
In addition to investing in an RRSP, you could consider deferring selling stocks that have accrued capital gains.
Income splitting between family members can be used to reduce your overall family tax bill. Shifting invested money and the income it generates away from the highest income member to a lower income family member such as a spouse or adult child can result in big savings.
Converting your income to the most tax-advantaged investments can lead to more money in your pocket.
For example, preferential tax treatment is given to investment income in the form of eligible dividends and capital gains.
We call income deferral, income splitting, and income conversion the 3 pillars of tax-efficient investing.