A Few Tax Tips

It’s always difficult to give specific tax tips in the Scrooge Guide because we have readers on 3 continents and taxation is different in each jurisdiction. However there are a number of things that are common to many different countries. Some of these are described below.
Interest expense
Take note of what interest expenses can be deducted from your income to compute taxes due. In Canada, for instance, interest can be deducted for anything that produces income (like a rental property) and is not in a tax-sheltered vehicle. In the USA (unlike Canada) you can also deduct interest on your home mortgage.
A Business on the Side
If you run a business on the side (part time) and it is making a loss, then that loss can often be deducted from your other income to give you a tax refund.
Offshore Business
This is an area where you should consult a tax accountant. Many islands in the Caribbean have tax treaties with other countries. That means if your business head office is located there and your income is processed there, then you are also taxed there but not in other countries. So, for instance, if you pay 5% income tax in Bermuda you will pay no other tax in any other countries even when you bring the money in because there is no double taxation.
Retirement Tax Shelters
If you put money into retirement tax shelters (RRSP, 401K, etc.) the money can grow there without being taxed. You also get a deduction on your current taxes owing when you make a deposit. You will be taxed when you withdraw it again but presumably you will be in a lower tax bracket then (for those of us in a so-called progressive tax system) and you will then pay taxes at a lower rate.
Education Tax Shelters
Many jurisdictions have education tax shelters that are beneficial. In Canada, for instance there is a shelter called the RESP (registered education savings plan). Put money into this for a child’s education and it can grow tax-free and the government also adds a grant to it. When it is withdrawn, it is taxed in the students hands so they usually pay no tax on it because of their low earnings during their post-secondary schooling years. The child doesn’t need to be your own. An aunt, uncle or unrelated friend can also contribute to one.
These are just a few things to consider now, to reduce your taxes this year.

Scrooge