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Wealth Management is about using the three D's of taxation for your benefit - Deduct, Defer, Divide.

Tax Planning

Taxation has an effect on the many personal and investment decisions in the financial planning process.  Some of the ways taxation can effect your choices include:

  • different tax rates for income, dividends, and capital gains
  • tax favored retirement plans such as RRSPs, locked-in retirement accounts, and deferred profit sharing plans
  • estate planning through deemed disposition at death, tax-free pass through of life insurance proceeds, and charitable gifting
  • education funding through RESPs and in-trust accounts
  • small business expense deductions, capital cost allowance, and loss carryforwards and carrybacks

The three D's to effective tax planning are deduct, defer and divide. You must understand each of these important functions to plan effectively.


A deduction is a claim to reduce your taxable income. A deduction will reduce your tax bill by an amount equal to your marginal tax rate. Some common deductions include:

● Pension plan contributions

● RRSP contributions

● Safety deposit box fees

● Interest expense

● Union/professional dues

● Alimony/maintenance payments

● Employment expenses

● Moving expenses

● Professional fees

● Child care expenses


A deferral strategy attempts to delay when tax will be paid. Deferring tax means you might eliminate the tax this year, but you will have to pay eventually.  Generally tax deferral has two advantages: It is better to pay a dollar of tax tomorrow than it is to pay a dollar of tax today; and tax deferral typically puts the control of when to pay the tax in the hands of the taxpayer instead of in the hands of the Canada Revenue Agency (CRA).

RRSPs, RESPs and various investment income strategies are the most common forms of tax deferral for the average Canadian.


Dividing taxes (or income splitting) implies taking an income and spreading it among numerous taxpayers.  For example, it is better to have two people (say a husband and wife) pay tax on incomes of $35,000 each than one person pay tax on an income of $70,000.  Unfortunately, you cannot arbitrarily decide who is going to claim what amounts for income. There are, however, strategies to divide income within the rules of the CRA:

1. Contribute to a spousal RRSP to help split income in retirement;

2. Split CPP retirement benefits with your spouse;

3. Invest non-RRSP savings in the lower income family members;

4. Invest the child tax benefit in your children's name;

5. Contribute to a registered education fund;

6. Pay wages to family members (through a business);

7. Use partnerships or corporations to earn business income;

8. Use either inter-vivos or testamentary trusts.

There are many other tax provisions which can affect your plans so the help of a certified accountant like myself can be more beneficial than you may believe.