As the year 2023 concludes, many taxpayers in North America are looking for legitimate ways to reduce their tax burden on the upcoming return. Tax authorities and expert groups have highlighted a variety of strategies that can help individuals save money—sometimes substantially. The guidance reflects practical steps that Canadians and Americans can consider to lower personal income tax when filing next year. The central idea is to plan ahead, understand available deductions and credits, and apply them thoughtfully to the taxpayer’s unique situation so that tax obligations are minimized within the law.
Who benefits most?
People with higher incomes or larger asset bases tend to gain the most from tax benefits because their opportunities for deductions and credits are more impactful. However, for those with annual incomes below certain thresholds, some deductions may be limited. The general principle remains: informed, proactive planning can lead to meaningful reductions in the amount owed when filing personal income tax.
Tips to pay less tax and reduce personal income tax
- Buy an electric vehicle or install a home charging system: In many jurisdictions, buyers can receive a significant credit or rebate for purchasing an electric vehicle or installing a charging point at home. This not only cuts current tax liability but also supports environmental goals and long‑term energy savings.
- Extension of maternity leave or other family-related benefits: Working parents can access deductions and credits that acknowledge caregiving and income loss during leave. These provisions help reduce the tax bill while supporting families with children.
- Working abroad: Income earned while employed by foreign employers can be treated favorably under certain rules. In some cases, a portion of foreign‑sourced wages may be exempt or eligible for credits, depending on residency and tax treaties. This can be a strategic avenue to lower overall tax exposure for eligible individuals.
- Donations to charities and membership dues: Charitable contributions and certain dues can generate deductions or credits that substantially reduce personal income tax while promoting social causes and civic engagement.
- Contributions to retirement plans: Putting money into retirement accounts remains an effective way to decrease current tax burdens, with annual limits that help people plan for retirement while reducing taxable income.
How can low-income taxpayers pay less taxes?
Even for those with lower incomes, opportunities exist to reduce personal income tax through targeted state or provincial and federal provisions. For eligible earners, rent deductions, refundable credits, and basic low‑income thresholds can provide meaningful relief when they apply to the taxpayer’s situation.
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As the year progresses, taxpayers should consider these strategies to maximize savings. From purchasing an electric vehicle to supporting charitable causes, there are multiple paths to reduce personal income tax. The approach that yields the best outcome is careful planning, awareness of available opportunities, and timely action to align with changing tax rules. When individuals understand the credits and deductions applicable to their situation, they can improve their tax posture for the next filing season and possibly contribute to broader social and environmental benefits.