- Minimizing the amount of income tax paid should also be part of each financial plan. It is completely legal to try to avoid paying tax through various measures like RRSP deductions, interest deductions, using tax free savings accounts, etc. Tax evasion is illegal and could result in serious legal issues.
- As income from various sources can be taxed at different levels it is important to structure investments and holdings in the most tax efficient way.
Long-term planning is also needed when assets are to be sold in the future that have large embedded capital gains. There may be ways to reduce or defer the income tax on these larger items with proper tax planning.