With the fast approaching year-end, it might not be a bad idea to consider sitting down and getting your tax paperwork together after the new year. Here are some tips from the tax planners at GARDHOUSE Financial Counsel.
If you have kids, or someone going to college in the family:
New tax cuts have been announced to help young families. The federal Children’s Fitness Tax Credit (CFTC) lets parents claim expenses from enrolling kids into sports and after-school programs on your tax returns. The CFTC is being doubled from $500 to $1000 and has became refundable, so families with lower income may receive additional refund.
Similarly the federal government provides an arts tax credit for eligible amounts up to $500 per year per child. It is available for fees paid for the enrolment of a child under the age of 16 in an eligible program of artistic, cultural, recreational or developmental activities.
The Child Care Expense Deduction is being increased by $1000: to a maximum of $8000 for children under 7, $5000 for children between 7 and 16, and $11,000 for children receiving Disability Tax Credit.
So don’t forget to include your receipts for any fitness, art, and childcare expenses when you bring in your taxes!
The Universal Child Care Benefit (UCCB) is also being expanded. For every child under 6, parents will receive an additional $60 per month on top of the $100 you are already receiving beginning July 2015. The $60 benefit also apply to children up to age 17.
Amounts paid for tuition are eligible for federal and provincial tax credits. The tuition, education and textbook credits are transferable to a spouse or common-law partner, parent or grandparent. Any current year unused tuition credits up to a maximum of $5,000 is transferable. Amounts not transferred may be carried forward indefinitely by the student. Interest paid on student loans is also eligible for both a federal and provincial tax credit. The tax credit must be claimed by the student, and can be carried forward for five years.
If you have charitable donations:
Charitable donations made by both spouses may be totaled and claimed by either person. You may claim donation up to 75% of your net income for the year. All donations may be carried forward for five years if they are not claimed in the year made. For taxation years beginning after 2012, a temporary charitable donor’s ‘super credit’ supplements the existing charitable donation tax credit. A first-time donor is entitled to a onetime 25% additional federal credit on donations up to a maximum of $1,000. You are considered a first-time donor if neither you or your spouse/common-law partner has claimed donations after 2007. This credit may be claimed once in the first-time donor’s 2013 to 2017 taxation years.
If you are over the age of 65:
Old Age Security is a monthly taxable benefit available to individuals age 65 and over who have met certain Canadian residency requirements. Benefits may also be affected by a social security agreement with a previous country of residence. Individuals must apply in order to receive OAS benefits. In July 2013, the government introduced a voluntary deferral of the Old Age Security (OAS) pension that will give people the option to defer their OAS pension by up to five years past the age of eligibility, and subsequently receive a higher, actuarially adjusted pension. For 2014, if an individual’s net income is greater than approximately $71,592, 15% of the excess over this amount must be repaid. The full OAS pension is eliminated when net income reaches $114,815.
The Guaranteed Income Supplement is a monthly non-taxable benefit paid to low-income OAS recipients. Eligibility to receive the benefit in 2014 is based on the annual income and marital status of the individual. Generally, individuals may automatically renew the GIS and Allowance by filing their income tax return.
If you incurred medical expenses:
The medical expense credit is calculated based on qualified expenses exceeding 3% of net income. You may claim medical expenses by you and spouses as well as a dependant. Examples of qualified medical expenses are: prescriptions drugs, dental, eye glasses, and travel expenses to see a specialist more than 40 kilometers away. Your medical claim doesn’t always have to be between January 1st to December 31st. If you incurred a large amount of medical expense near the end of 2013 and at the beginning of 2014, you may claim a 12-month period that provides more tax benefits. Talk to our tax planners if you are not sure what to bring.
If you are self-employed:
There’s a lot to consider when it comes to running your own business. The key to maximizing tax benefit on your return is being organized and well- planned throughout the year. On top of your regular business expenditures, you can also claim business-use-of-home-space expenses, business-use-of-personal-vehicle expenses, and interest on money borrowed to earn an income. A general rule of thumb is if you put out money to make money, it will typically be claimable.
Considering a long-term saving plan?
If you have money saved up and not considering using for a while yet, the government of Canada have a number of registered saving plans to help you and your family to reach the goal of long-term security, such as RRSP, TFSA, RESP, and RDSP. If you are planning for retiring soon, or considering estate planning, we also have a number of financial and non-financial services to help you reach your goal. Talk to one of our advisors to find out how we can help.
All of the points discussed in this article provide a very general outline of how you can reduce your taxes and generate those refunds we all love. In order to maximize their potential value an individual evaluation of your situation should be done with one of our tax planners.
Lingzi Huang, BAcc
Senior Accountant
