We trust you are enjoying the beautiful summer like weather. It's a great break from the endless winter we seemed to have had.

Here are 5 ideas that you can implement to increase your wealth and reduce taxes.

1) Consider Killing Your Mortgage with a Home Equity Line of Credit.

As it stands, mortgages accumulate interest all year long. Traditional mortgages offer few advantages and many disadvantages. If you create a home equity line of credit, you can take up to 10 years off the life of your mortgage. That means more money for you to put into retirement planning, your kids education, or a cottage / vacation.

ManuLife has an excellent product called ManuLife One that turns your home into a line of credit. You can check it out at www.manulifeone.com. Make sure you have a look at the Quick Calculator section on the site to see how effective this type of program is at reducing your taxes.

2) Consider Deductible Non Registered investments.

Here’s the problem – most Canadians won’t be able to retire on their RRSP’s. Either the limits are too low or they just started too late. As well, all withdrawls from an RRSP are considered taxable. And if you speak with most well heeled seniors, they hate RRSP’s. Surely, there must be a better way.

Consider creating a loan for the purpose of creating a deduction, just like an RRSP. Take the amount for the loan, say $100,000, and invest it in a non-registered asset. But choose carefully, as this asset should not produce any taxable interest or dividends – strictly capital gains.

Let’s assume an 8 percent interest rate and let’s assume, that the money doubles in 9 years time. You then liquidate the proceeds and pay off the loan. The rest of monies are yours at tax preferred rates since a) the money is non registered and b) the tax is capital gains tax, of which only 50 % of the gain is taxable. It results in about 25 % the tax of a regular RRSP. That means more money in your pocket! As well, it means you don't have to save as much for your retirement.

3) Health Spending Accounts.

Aren’t you sick and tired of paying for insurance programs that seem like just savings plans, only they are worse in that the benefit paid out doesn’t even measure up to the premiums paid. A perfect example of wasted monies is dental bills. If you look at an average dental plan, they cost about $50 / month and they offer about $600 / year of coverage. What’s the point? And you generally don’t use all the services over the year so the money is lost.

For non-catastrophic benefits, consider setting up a Health Spending Account. It’s simply a bank account that you set up with a fixed monthly contribution. So, for example, if you deposit $100 / month into the plan, well you can deduct $1200 /year just like an RRSP. At the same time, the monies can be used to pay for any medical / dental expense.

4) Individual Pension Plans

If you are like most business owners, you are looking for ways to increase your retirement fund. If you are over age 40, and have an income from your business in excess of $100,000, the Individual Pension Plan absolutely flattens an RRSP in contribution limits.

Here’s the idea – according to the Pension Act, you are allowed to create a pension equal to $2000 / year for each year of services. At the age of 65, this can equal up to $100,000 in income. To generate $100,000 in income at 65 for perpetuity, you need to have a serious lump sum of money. So, the IPP allows you to deposit a considerable lump sum (in some cases up to $200,000) into the IPP, which is fully deductible to the corporation. On top of that, limits exceed considerably the RRSP limits. At retirement, the benefit exceeds the RRSP by a significant amount, allowing you a wealthier retirement.

5) Universal Life Insurance

If you have maxed out your RRSP’s and payed down your mortgage, you might want to give a good look at Universal Life. Based on the fact that the proceeds within a policy accumulate tax deferred, UL is an excellent way to accumulate income as well as provide much needed insurance monies. The UL has investment options that resemble mutual funds – if the funds do well, the UL policy performs well. Forgiving the fact that the premiums are not tax deductible, the investment is on par with RRSP accumulation. If set up properly, the proceeds can be taken out tax free from the plan (best to speak with an advisor, however).

If you have any questions, please feel free to email us at johnk@lms.ca or phone (416)-644-7700.