A central theme of your financial plan should be estate conservation through the minimization of income taxes both during your life and after death. In Canada, we have a progressive or graduated income tax system.
This means that the more you earn, the higher your tax rate will be.
The marginal tax rate is the rate of tax applied to the last dollar added to your taxable income.
The average tax rate is calculated by dividing the total income taxes paid by your total income. Since it includes taxed paid at all levels of income, it will be less than the marginal tax rate.
The three “D’s” of tax planning are: deduct, defer and divide. It is important to understand these three important functions to do effective tax planning and keep your taxes to a minimum.

Deduct: this is a claim to reduce your taxable income. Each deduction will reduce your tax bill. Some common deductions are:

  • RRSP contributions, pension contributions, union or professional dues
  • Interest expense on investments, rental property, business, etc
  • Childcare expenses, moving expenses, charitable and political contributions, etc

Defer: this means to delay paying incomes tax to future years, instead of today. Some of the common ways to achieve this are:

  • RRSP’s , RRIF’s, RESP’s and TFSA’s are examples of how to: shelter income from taxes until withdrawals are made in future years
  • Buying and holding equities: taxes will be delayed until you sell the stocks.
  • Investing in mutual funds through corporate tax structure.

Divide: Often referred to as income splitting, dividing taxes implies the ability to take income and spread it among a number of different taxpayers. For example, if you have one person with a high income and the other with a lower income, you can employ some of the common strategies as follows:

  • Spousal RRSP’s help split income in retirement
  • Splitting pension or CPP retirement benefits with your spouse
  • Investing non-RRSP savings in lower earning family member’s account
  • Making loans to lower tax family members to invest, etc

Insulators Local 95 Benefit Trust Fund c/o Benefit Plan Administrators 
90 Burnhamthorpe Road West, Suite 300 Mississauga, Ontario L5B 3C3