By: Larry MacDonald

Gail Bebee, author of No Hype – The Straight Goods on Investing Your Money, says now is the time to start taking steps to reduce your taxes for the 2009 filing year. “Taxpayers shouldn’t just file away their 2008 tax returns. By spending just a few minutes examining the income and deduction lines, many Canadians could find ways to reduce the income tax they’ll pay in 2009,” she says. Here are some of her examples.

Line 120 – If you include Canadian dividend paying stocks in a taxable investing account, you’ll pay less tax due to the dividend tax credit. 

Line 121 – Interest and other investment income is taxed at the highest marginal tax rate. The more your taxable investments generate capital gains or Canadian dividends, the less tax you’ll pay.

Line 121 – Make sure you set up a Tax Free Savings Account: the profits you make inside the account will not be taxed, reducing your line 121 income. It may not look like much at first with the $5,000 limit on annual contributions, but in 10 years, you can be sheltering $50,000 plus accrued interest.

Line 127 – You can carry 2008 capital losses forward indefinitely. If you had 2008 losses, these could offset the tax on capital gains made in 2009.

Line 221 – You can deduct investing expenses such as safety deposit box charges and certain fees for investing advice.