TAX SAVINGS

You have net income of $128,355 from all sources. Your accountant has told you to get your taxable income to the next lowest tax bracket.

1. Determine what amount your taxable income must be, and use the following options to find a way to achieve this:

• Basic Personal Amount of $13,329 given as a deduction by the government.
• You have RRSP contribution room of $16,500
• You have a savings account with $21,000, which is highly liquid (you can convert to cash quickly)
• You have $950 in non-covered medical expenses from the year
• You have given $10 every Sunday to the local church

b. Determine the tax savings by getting yourself out of your current tax bracket.

c. Ultimately, what should you do with the tax savings, in order to offset your decision to lower your marginal tax rate?