If you sell a capital asset, it will be entitled to capital gains tax, and many countries are extremely particular about it. Capital gains tax in Canada is a big thing and the government is serious in implementing it. It is heavy on fine once you are caught not declaring your taxes accurately. It is illegal to avoid paying capital gains tax, but it does not necessarily mean you cannot keep it to a minimum amount. The taxable component of capital gains tax consists of total income and is therefore subject to your marginal tax rate.
You can reduce your tax burdens by using these legal strategies:
Invest your money in a tax haven – Tax shelters protect your investments by acting as umbrellas. Your investments are allowed to grow duty-free as long as they stay inside a tax haven. You are allowed to purchase and sell equities whenever you choose without worrying about the tax implications. The only drawback? Capital losses cannot be deducted from your overall income.
Offset capital losses – Let’s discuss victories and defeats. The profit is essentially nothing if, in the same year, you sell a certain stock and make $1,000, but you lose the same amount doing so. You won’t be required to submit capital gains tax if the win and loss balance each other out. However, what if you simply had losses to report and this wasn’t really your year? This is where the method comes in: you can apply your losses to other years to balance any profits you would be taxed. It is quite tricky though, but a professional tax person can help you out in this matter. It will go to make things easier for you.
Give your shares to a worthy cause – Do you need extra motivation to perform a good deed? You can think about giving your shares to a charity rather than cash. It’s a chance to earn some karma points while saving money on taxes. You receive a donation tax credit depending on the shares’ market value at the time, in addition to the fact that the “profit” from the shares is regarded as zero.
