D. Smith: Tips to help increase your cash flow

Contributing to your own RRSP or to a spousal RRSP is a strategy to consider for family income splitting.

Contributing to your TFSA is an efficient tax saving strategy.

As of 2013, the allowable amount has increased to $25,500 and as of Jan. 1, 2014, the government will allow us to top up again with next year’s allowed contribution.

You can put stocks, bonds, mutual funds, GICs and other saving types of investments in your TFSA. Choose your investments wisely in your TFSA.

Do you need your funds soon or is this a long-term investment strategy? Determine what type of investment you should have in your TFSA and how long your TFSA investment strategy is.

If you have a TFSA and credit card debt or consumer debt, ask your certified financial planner or accountant to review your options with you.

If you are not happy with your current TFSA provider, you can transfer this registered investment using government transfer forms to a different financial institution.

Naming a beneficiary on your TFSA avoids probate and legal fees if you pass away. This is a good estate planning strategy to transfer your TFSA to a family member tax-free upon death.

Cash flow out of a TFSA is tax-free and the funds withdrawn out of a TFSA this year can be replaced the next calendar year.

Should you contribute to your TFSA, RRSP or spousal RRSP? Discuss the variable options with your certified financial planner so you make the right choice based on your current income and your retirement income.

Contributing to your own RRSP or to a spousal RRSP is a strategy to consider for family income splitting.

Corporate class investing is a tax efficient way of investing outside of a registered plan.

Under the corporate class umbrella, you can rebalance your portfolio on a regular basis to adjust holdings to take advantage of market trends.  Any age of investor will benefit from maximized tax efficiency in corporate class funds.  This is also a great concept for incorporated business owners resulting in less tax paid on annual investment earnings.

Spouses and common-law partners are now allowed to allocate up to 50 per cent of eligible pension income to their spouse or partner, to qualify for the existing pension income tax credit of $2,000 annually.

For those over the age of 65, with no other eligible pension income, consider drawing $2,000 per year from your RRIF tax free. Even if you don’t need the $2,000 annual withdrawal, this amount is withdrawn tax-free. You can transfer sufficient RRSP assets to a RRIF to allow the annual tax-free $2,000 withdrawal. Or, you can purchase an insurance a GIC and draw $2,000 per year under eligible pension income.

Incorporated business owners can use income splitting strategies for family members. You can pay family members (i.e., spouse or children) a reasonable salary for services to the business.

This is an efficient way to split income within a family, reducing the tax paid by the highest income earner and increasing taxable income for a lower paid family member.

You can consider paying dividends verses wages to shareholders of the corporation.

Reviewing cash flow and tax-efficient income is an ongoing strategy to minimize taxes for Canadians.

The opinions expressed are those of the author and may not necessarily reflect those of Manulife Securities Investment Services Inc.

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