# How can I lower my net income.



## emperor (Jul 24, 2011)

I make just over 46K a year so I end up in a higher tax bracket.

If I can lower my net income by 5K then I would save 300 dollars.

I'm single and live on my own so I can't transfer anything to my wife or dependents.

I have a high paying pension plan so my RRSP maximum allowable contribution is always 0.

I'm not sure but I think I could start a small business and run at a loss using the write offs to lower my income but is there anything else I can do?

Thanks


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## andrewf (Mar 1, 2010)

Give 5 grand to charity?

There, I fixed it.


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## omegacanuck (Jun 16, 2011)

I always love the business idea. Yes, it is indeed true that if you start a business and loose money, you can write it off against your other income. However, that being said, want to loose $5000 in order to save what, $1500? Tell you what, if that's your big plan, just send me the $5K, I'll even give you a receipt for it. I'll be happy to declare the income, pay the $1500, and pocket $3500.


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## esquif (Apr 25, 2009)

But 5k is still more than 300$. Enjoy your 5k.


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## the-royal-mail (Dec 11, 2009)

This is absurd. Do you understand how tax brackets work? When you enter a new bracket, you are taxed on the incremental increase. For instance, if the bracket starts at $41K and you make $46K, you are not taxed at the new rate for the entire $46K. You are only taxed at the new rate for the $5K above the previous bracket maximum.

It seems crazy to me to fuss with running a doomed business and doing all sorts of red tape for the matter of $300 (if that's what we're talking about here). As esquif says, $5K is way more than $300. 

Don't cut off your nose to spite your face.


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## FrugalTrader (Oct 13, 2008)

Send me $5k, and I'll send you $1.5 k back.


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## andrewf (Mar 1, 2010)

FrugalTrader said:


> Send me $5k, and I'll send you $1.5 k back.


We have a winner!


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## Square Root (Jan 30, 2010)

andrewf said:


> Give 5 grand to charity?
> 
> There, I fixed it.


That would be a tax credit. I think the "emperor" is looking for an income deduction. Doubt we'll hear from this guy again. Very weak first post "emperor"


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## Larry6417 (Jan 27, 2010)

*The emperor has no clothes!*

Sorry 

Losing money to save on tax leaves you behind, not ahead. If your risk tolerance is high enough, you could take out an investment loan (as long as your chosen investments pay interest or dividends) and deduct the interest costs from your taxes. You should be able to save $300 without losing (hopefully!) money.


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## emperor (Jul 24, 2011)

Thanks for the info Larry, I'll look into that further


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## Helianthus (Oct 19, 2010)

the-royal-mail, +1

Felt like saying something along those lines yesterday, but I didn't want to seem harsh.


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## the-royal-mail (Dec 11, 2009)

^ thanks. 

To be honest, this is the second similar post in as many weeks. It's like the world thinks CMF is the place to come for tips on tax avoidance strategies. That's not what CMF is for. I am offended by high taxes/fees/levies as much as the next guy, but I also realize I need to pay my fair share as a citizen of the country which provides roads, clean drinking water, healthcare and many other gov't services.

Perhaps the mods could pin a thread or an advisory that CMF is not a forum for tips on avoiding and evading taxes. These threads are starting to be a bit more frequent.


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## cannon_fodder (Apr 3, 2009)

the-royal-mail said:


> Don't cut off your nose to spite your face.


actually if the medical expense were high enough this write-off would do the trick.


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## cannon_fodder (Apr 3, 2009)

I didn't get the sense that the OP is looking for illegal ways to not pay taxes. 

There are many guides in book form or on the Internet which talk about overlooked or underused tax breaks. 

Running a business at a consistent loss not only is financially unwise but will pique CRAs interest in it. Not a good idea. 

I'd spend more time figuring out how I could make more money even though it requires paying more taxes.


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## marina628 (Dec 14, 2010)

Married a disabled person for their tax credit


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## DrStan (Apr 5, 2009)

Running a sham business just to generate losses is definitely a bad idea. And sorry to break it to you, but $46K is not a princely annual income. You pay relatively little taxes (about 18% income tax or $8,250 in total if you are in Ontario). At $80K, you pay about 25% in income tax or $20,000. Actually, this reminds me of something - last week I was in Starbucks and the clerk was complaining about how much income tax she was paying... I felt like taking her aside to explain the reality of life. Anyhow, I'm not sure that borrowing to invest is such a great idea. It works well for savvy investors with strong investment and financial knowledge and with good financial backing (i.e., the investment loan represents a relatively small part of net worth). Not sure if that's the case here.


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## andrewf (Mar 1, 2010)

DrStan, don't you read the Toronto Sun? Everyone knows we're all paying 50% tax.


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## emperor (Jul 24, 2011)

Thanks for all the responses

I'm not asking for advice on if I should lower my income or not. In order to make those kind of decisions you need to see the whole picture which I'm not typing out and putting on the internet. 

I just wanted to know ways to reduce or defer income tax. 
I knew about RRSPS and the various write offs but I was wondering if there was anything else. Larry pointed out deducting interest costs from an investment loan which was something I didn't know about.

What I can gather from the other posts is that a RRSP is really the only major way to lower your net income by deferring it to another time.


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## MoneyGal (Apr 24, 2009)

It's the main one. (By the way, I think this is a totally legitimate question and one everyone should be contemplating.)

A quick way to answer this question for yourself is to review the list of deductions from gross income that CRA maintains on its web page, here: 

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/menu-eng.html

For example, the interest on an investment loan deduction is spelled out in line 221. 

I'd suggest reading that page, and the "related topics" that come up on each page that you submit, to make sure you are claiming/deducting what you can. 

There are lots of deductions from gross income, as you can see. For example, child care expenses (to a limit) are fully deductible and provide the same tax relief as an RRSP contribution. However, unless you have kids, you will have no child care expenses. 

So I think the best course of action is for you to read through the list, and contemplate whether any of those deductions are available to you, and whether it makes sense for you to arrange your affairs in future to take advantage of any of those deductions.


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## willie1959 (Mar 10, 2011)

Capitol losses = a trust. best tax deduction there is.


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## DrStan (Apr 5, 2009)

It may be obvious, but if you are borrowing to invest and purchase investments that generate income or dividends or capital gains, this income will be added to your other income, therefore defeating your objective. It may essentially be a wash (adding the income from the investments, and deducting the interest cost from the investment loan; and don't forget investing adds risks). It's difficult to give advice and suggestions with the minimal info provided. The ideal tax range is about $30K income per year - then you only pay $4K in combined fed-prov taxes in Ontario (13 %), versus $8K in taxes at $46K income (17 %).


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## ghostryder (Apr 5, 2009)

emperor said:


> I make just over 46K a year so I end up in a higher tax bracket.
> 
> If I can lower my net income by 5K then I would save 300 dollars.
> 
> ...



Instead of bothering with all the hassle of bookkeeping, getting audited etc running a business why don't you just ask your employer to cut your pay by $5000?


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## the-royal-mail (Dec 11, 2009)

I see.

Has the OP considered the TFSA? This is perhaps something worthy of consideration. Yes, it's after tax money but the good news is it is a $5K/year permanent tax shelter. You'll have a free run at the investing game and be able to attempt to make the money grow, without that growth ever being taxed. If anyone reading here is smugly thinking they can make enough in investments to cover the costs of interest payments and other fees (such as the borrowing to invest threads that keep cropping up), the TFSA would be an excellent opportunity to try it first and see how much $ you are able to make. It's also good in the OP's case because it is a tax savings of sorts, just not the instant gratification that some may wish for.

Still, there are two certainties in life: death and taxes. So don't be _too_ preoccupied in trying to reduce your taxes. $46K is not the kind of income that normally causes this type of alarm.


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