# how to reduce taxes on severence



## cautiousone (Jun 9, 2009)

I have received a small severence package because my employer ceased operation this year. Tax was paid at source.

I have no remaining RRSP room and have maximized a retiring allowance option.

What tax reduction strategies am I missing? What other factors am I not considering?


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## leslie (May 25, 2009)

Nothing now, that I know of.


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## cautiousone (Jun 9, 2009)

Thanks for your repsonse, Leslie; I just wanted to ensure that I've covered all the bases. A few years ago, when my husband was handling our personal finances and wanted to discuss issues with me, my eyes would glaze over. Now, I'm handling the household finances and monitoring our investments. That's an improvement! I still have much to learn!


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## John_Michaels (Dec 14, 2009)

cautiousone - since tax was paid at source, is the question FUTURE tax reduction strategies? 

If so, contribute to political parties (more tax credit), pretend-investments like flow through shares which I equate with with those 'great' labour sponsored funds and the like?

Personally, I never understood these tax-reduction strategies as it involves spending money to reduce taxes..eh, I'd come out ahead keeping my money. Hopefully somebody could tell me otherwise?


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## cautiousone (Jun 9, 2009)

John Michaels, guess I'm thinking this severence amount may boost me, this year, to the cusp of the next tax bracket.


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## AdamW (Apr 22, 2009)

*Flow Through Shares or Donations*



cautiousone said:


> John Michaels, guess I'm thinking this severence amount may boost me, this year, to the cusp of the next tax bracket.


The only option I can think of would be to make a donation to ensure you are not in the highest tax bracket.

Alternatively you could purchase flow through shares, this will also reduce your taxable income but does put the severance money at risk.

Safest thing to do is pay the taxes and be done with the old job and the government at the same time.


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## cautiousone (Jun 9, 2009)

Thanks, AdamW. 


AdamW said:


> Safest thing to do is pay the taxes and be done with the old job and the government at the same time.


I now agree.


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## Reflector (Jan 28, 2010)

cautiousone said:


> I have received a small severence package because my employer ceased operation this year. Tax was paid at source.
> 
> I have no remaining RRSP room and have maximized a retiring allowance option.
> 
> What tax reduction strategies am I missing? What other factors am I not considering?


For years worked prior to 1996, you can shelter $2,000 per year. This is on top of any RRSP contribution room. For years worked prior to 1989, you can shelter an additional $1,500 per year ($3,500 total).

The sheltering was eliminated in 1996 in order to lower the deficit, however it was never reinstated after the deficit was paid down.


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