It doesn’t take long after getting your first paycheck to realize something: not all that money is yours. The Canadian government takes a share—and the more you earn, the more it takes. But here’s the good news: with a bit of basic tax knowledge, you can hang on to more of your income.
Having a tax strategy isn’t just for the wealthy. The Canadian tax system has plenty of opportunities for everyday people to save money. A few small changes and smarter decisions can really pay off. Here are some simple, practical ways to make life a little less taxing:
1. Understand How Your Income Is Taxed
Not all income is taxed equally. In Canada, we use a tiered system. That means your first dollars are taxed at lower rates (around 21%), and the more you earn, the more that last chunk of income can be taxed—up to 53% depending on your total income.1 So, if a raise is going to push you into a higher bracket, you might want to boost your RRSP contributions or make a charitable donation. These can lower your taxable income and keep you in a better bracket.
2. It’s About Net Income, Not Just Earnings
Your taxes are based on net income, not gross. That means the government gives you credit for things like RRSP contributions and other deductions before figuring out what you owe. So even if you get a raise, you may not end up paying more taxes—if you adjust your contributions wisely.
3. Pay Yourself First (and Let the Government Help)
One of the best ways to save on taxes and build your retirement is to contribute to your RRSP. Not only do RRSP contributions reduce your taxable income, but they grow tax-free until you withdraw them in retirement. It’s a win-win. For 2025, the contribution limit is 18% of your earned income, up to $32,490.
4. Don’t Overlook Other Tax Breaks
If you’re decluttering, keep in mind that donations to CRA-approved charities—whether cash or items—can earn you a tax credit of up to 40%. That old couch you donated? It might be worth a few hundred bucks in tax savings. And if you forgot to claim donations from past years, no problem—receipts are valid for up to five years.
5. Consider Starting a Business
Thinking about launching a side hustle? Many business expenses are tax-deductible, from start-up costs to everyday operational expenses. Even a small home-based business can offer significant tax perks.
6. Review and Refresh Every Year
Tax rules and personal situations change. Make it a habit to review your tax strategy annually. Things like childcare costs, union dues, and investment fees may all be deductible—but only if you have proper records and receipts.
A little tax knowledge can go a long way—and keeping more of your money never goes out of style.
1 Income Tax Rates used are the combined Federal and Ontario tax rates.
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