Top Five Commonly Overlooked Tax Tips
1. Medical expenses: If you pay a healthcare premium through payroll deduction, this is
considered a medical expense as well as any deductibles or out-of-pocket expenses that are not covered by your plan. If you purchase healthcare insurance to travel, this can also be claimed as a medical expense.
2. Disability tax credit: Many taxpayers feel they do not qualify but it may be worth asking your doctor to review the criteria on the T2201 medical disability form. After it has been certified by your physician, the form is submitted to the CRA and they will determine whether you qualify.
3. Report your income: Any child under 18 who works part or full time during the summer
months may be entitled to a refund of taxes paid if their income is below the basic personal
amount. Even if no tax is deducted, reporting the income will increase the child’s RRSP
contribution limit for future years.
4. Get your benefits: Those turning 19 before April 1, 2019 should be filing a 2017 tax return
even if they had no income. This will allow them to collect the GST/HST credit for the quarter following their 19th birthday.
5. Determining dependents: Even with people names, pets are NOT dependents. But if an
infirm relative is dependent on you for support, you may be able to claim the Canada Caregiver Credit.
Top Five Things You Missed on Your Tax Return
1. Employment expenses: Expenses incurred while on the job are not necessarily deductible.
They can only be claimed if they are required as part of your job contract and you have a signed T2200 Declaration of Conditions of Employment from your employer. Plus, you need supporting receipts. However, even if you cannot claim employment expenses, you can still claim the Canada Employment Amount of $1,178 which is designed to cover incidental employment expenses without having to prove that you actually incurred any.
2. Student loan interest: If you have graduated or left school and are paying off government
student loans, you can claim your annual interest as a tax credit. Interest on private loans or lines of credit doesn’t qualify.
3. Home Buyers’ Amount: If you were a first-time homebuyer in 2017, you are most likely
eligible for the $5,000 home buyers’ amount to assist with the related costs, regardless of how much you actually spent. The $5,000 personal amount translates into tax savings of $750.
4. Moving expenses: You can claim expenses if you move 40 kilometers or more for work or
school. Besides the usual moving and transportation costs, you are also allowed to claim storage costs, up to 15 days of temporary accommodations, meals, and the cost of cancelling a lease or selling your old home. The legal costs incurred in buying a new home can also be claimed, but only if you sold your old home as a result of the move.
5. Medical expenses: The amount you can claim is tied to your income so the more receipts you have, the better chance you will see some tax savings. Premiums deducted from your paycheque for group health plans are often missed as is medical insurance you take out when going on vacation. And if you have to travel more than 40 kilometers to get medical services which are not available locally, you can claim transportation expenses. Travel more than 80 kilometers and you can claim other travel expenses such as meals and accommodation.
New to Canada? Part Year Residents Need to File Taxes Too
People entering Canada can be classified as: non-residents, deemed residents or part year residents. Although the tax treatment and deductions differ for each classification, part-year residents are the most common type. Here are some important tax tips that will help part-year residents:
• In Canada, residents are taxed based on their world income. Part-year residents must report all income from anywhere in the world after their arrival in Canada.
• New Canadians are entitled to the GST/HST credit after their arrival. If they qualify, the amount received is based on their world income for the preceding year.
• If the new resident has investment income abroad, they may be required to notify the payers of their Canadian residency status. Certain tax treaties provide for a reduced rate of withholding in the originating country.
• Moving expenses to Canada are not deductible with one exception. If the immigrant is a student studying at a post-secondary level, moving expenses may be deducted against the taxable portion of any scholarships, bursaries fellowships, prizes or research grants he or she received.
• Personal amounts and dependent claims may have to be pro-rated depending on the period of residence in Canada.
• Immigrants with children may qualify to begin receiving the Canada Child Benefits the month after they arrive depending on their immigration status. Form RC66 (Canada Child Benefits Application) and the related Schedule RC66SCH – Status in Canada/Statement of Income. should be completed shortly after arrival.
• New Canadians who own capital property such as real estate and securities should determine its Fair Market Value (FMV) on the day they established residence. This constitutes the deemed cost for calculating any future capital gains and will ensure that when the property is sold they will only be taxed on the difference between the sale price and the value when they arrived in Canada. However, this does not apply to taxable Canadian property (such as real estate situated in Canada) owned at the time of entry.
SEPARATED IN 2017 ? HERE IS HOW TO HANDLE YOUR TAXES ALONE
• Marital status: For tax purposes, your marital status is determined on December 31 of the tax year. So if you are separated on December 31, 2017, you would put “separated” as your marital status. If you were in a common-law relationship, you are only considered separated if the period of separation lasts 90 days or more, so if you separated on December 1, you will not be considered separated on December 31 unless you remain separated on March 1.
• Inform the CRA: Breaking the news to the Canada Revenue Agency may not be high on your list of priorities. However, since your GST/HST Credit and Canada Child Benefit is now based solely on your income, it will usually be to your advantage. Use Form RC65 Marital Status Change to advise them and they will recalculate your entitlement effective for the next payment date.
• File a Return: You will have to file a tax return in order to continue receiving the GST/HST Credit and Canada Child Benefit for the next benefit period.
• Claim the Spousal Amount one last time: If you supported your spouse or common-law partner while you were together, you can still claim the spousal amount for one last time. The credit will only be reduced by the amount he or she earned before you separated.
• Single parents: If you have custody of your children, you can claim the amount for an eligible dependent for one of them on your tax return. The amount you can claim may be reduced if your child is earning income.
• Child Support and Alimony: If your ex is paying child support, it is not taxable to you. Nor can they claim a deduction for it. However, periodic spousal support payments are taxable to the recipient and deductible to the payer as long as they are made pursuant to a court order or written separation agreement. If you fall behind with your child support obligations, you may find that the amount owing is withheld from your income tax refund.
YOUR QUICK TAX GUIDE TO RRSPS
• Beat the deadline: The deadline for making a contribution to a Registered Retirement Savings Plan (RRSP) that can be deducted on your 2017 tax return is March 1, 2017.
• Know your limit: Your contribution limit for 2014 is based on a number of factors including your earned income in 2013 and your unused contribution room from previous years. It should be included with the Notice of Assessment for your 2013 tax return.
• Over the limit rules: Contributions of up to $2,000 in excess of your RRSP contribution limit can be made without being subject to a penalty tax.
• Spousal support: A spouse in a higher tax bracket may consider income-splitting opportunities for the future by contributing to a spousal RRSP. However, the contributing spouses are limited to their own personal deduction limits.
• Contribution room: RRSP contributions can be carried forward if claimants foresee being in a higher tax bracket in future years. This will help maximize the tax deduction.
• Age restrictions: If you turn 71 in 2015, you must convert your RRSPs into a form of retirement income before the end of this year or be taxed on the Fair Market Value of the plan.
• Withdrawal is considered income: With the economy still uncertain, some Canadians turn to their RRSPs as a source of funds. Money withdrawn from an RRSP is considered income in the tax year it was received. You will have to add it to the other income you earned during the year on your tax return. While 10 to 30 per cent of an RRSP withdrawal, depending on the amount, is withheld at source, that’s usually not enough to cover the total tax liability.
• Withdrawals without penalties: The Home Buyers Plan (HBP) and Lifelong Learning Program (LLP) do allow you to withdraw funds from your RRSP without penalty, as long as they are paid back within the appropriate time frames. If the funds are not repaid, they will be considered income.
TAX TIPS FOR CANADIANS 65 OR OVER
Income split and save: Seniors are allowed to split up to half of their eligible pension income with a spouse or common-law partner. Income splitting allows some seniors to enjoy a significant tax reduction. In the situation where the lower-income spouse has very little income, the tax savings are substantial.
Get your benefits: Any senior receiving Guaranteed Income Supplement (GIS) through Old Age Security should file on time to ensure their benefits continue uninterrupted.
Transfer amounts: If your spouse is unable to completely offset his or her age amount, pension income and disability amount against tax payable, he or she may transfer the unused portion to your return.
Caregiver amount: If you are dependent on your children due to an infirmity and your income is less than $23,046, they may be able to claim the Canada Caregiver amount for you. They can no longer claim it if you are not infirm, even though they are living with you.
Foreign pension income: Pensions from foreign countries may be subject to special tax treatment under the terms of a tax treaty. Always check with a tax professional to find out if the pension you receive from a foreign source is taxable in Canada.
Split your CPP and save: You may be able to split part of your CPP retirement benefits with your spouse depending on how long you lived together when you were contributing to the plan. This is an advantage if one senior is in a higher tax bracket than the other. However, to do so, you must apply to Employment and Social Development Canada using Form ISP-1002. It cannot be done at the time of tax preparation.
Medical expenses can add up: If you purchase medical insurance for a trip or wintering in another country, it is considered a medical expense. Medical expenses are calculated based on income so it is normally more beneficial for the lower income spouse to claim them. And if you have to travel to obtain medical treatment that was not available where you live, you may be able to claim the cost of transportation, meals and accommodation.
CANADIAN TAX CHECKLIST
We want to make sure you get every tax creditand deduction you’re entitled to.
So, before you get started on your taxes, make sure you have all the receipts and income records you need.
Here’s a handy checklist:
☐ T4 slips (Employment income)
☐ Employment insurance benefits (T4E)
☐ Interest, dividends, mutual funds (T3, T5, T5008)
☐ T2202 Tuition and Enrollment Certificate
☐ Old Age Security and CPP benefits (T4A-OAS, T4AP)
☐ Other pensions and annuities (T4A)
☐ Social assistance payments (T5007)
☐ Workers’ compensation benefits (T5007)
☐ All other information slip
☐ RRSP contribution receipts
☐ Support for a child, spouse or common-law partner
☐ Professional or union dues
☐ Tool expenses
(Tradespersons & apprentice mechanics)
☐ Other employment expenses
☐ Teacher’s school supplies
☐ Medical expenses
☐ Home renovations (seniors and disabled)
☐ Political contributions
☐ Child care expenses
☐ Adoption expenses
☐ Moving expenses
☐ Interest paid on student loans
☐ Carrying charges and interest expenses
☐ Office-in-home expenses
☐ Exams for professional certification
☐ Notice of Assessment/Reassessment
☐ Canada Revenue Agency correspondence
☐ Sale of principal residence
☐ Sale or deemed sale of stocks, bonds or real estate
☐ Northern residents deductions receipts
☐ Rental income and expense receipts
☐ Business, farm or fishing income/expenses
☐ Automobile / Travel logbook and expenses
☐ Disability Tax Credit Certificate
☐ Declaration of Conditions of Employment (T2200)
☐ Volunteer Firefighters certification
☐ Search and Rescue volunteers certification
☐ Written certification for eligible educator school supplies