Have you taken advantage of all your tax deductions?
Time to get a little serious. Its tax season.
As February is approaching a lot of people are starting to think about taxes.
Some tax returns are fairly simple and can be completed online using free software. CRA’s website provides you with a list of certified software you can use to file your return for free or for a small fee. Note 1
A return starts to get complex when there are multiple types of income (i.e. self-employment, investments, rental), changes in family structure, sale of properties etc. Note 2. When your return starts to get complex, it’s probably best to find an accountant to prepare and file your return for you. A good accountant will know the current laws, what deductions and credits to apply and when to apply them (sometimes it is better to carry credits such as donations forward) so that your overall tax liability can be minimized. They can also deal with CRA on your behalf.
For the Do-It-Yourselfers, here’s a list of commonly missed deductions and credits, including changes for 2016:
1. Disability tax credit – this credit covers a pretty broad range of physical and mental impairments and may include ADD, anxiety, autism, learning disabilities etc. Note 3
2. Medical expenses – many people don’t bother because they don’t think the sum of the expenses will exceed the require threshold (2016 – lesser of 3% net income or $2,237). There are A LOT of expenses that are considered medical expenses. Did you know that the difference in the cost of gluten free food can be considered a medical expense? Note 4
3. Moving expenses – If you moved in order to be closer to your place of work, you can get a credit on the expenses. If you moved to be a full time student in a post secondary program, you can also claim the expenses. Note 5
4. Children’s fitness credits – enrollment of your child in a program involving physical activity is maxed at $500 (2015 - $1,000)
5. Children’s arts credits – enrollment of your child in a program involving artistic, cultural, recreational or development activity is $250 (2015 - $500)
6. Home office expenses – if you are self-employed and use a designated space in your home to conduct your work, you may be eligible to deduct a portion of the expenses you normally incur such as mortgage interest, heat, electricity, property taxes, maintenance and insurance.
7. If you borrow money to finance an income generating investment (i.e. rental property, stock options etc.), the interest you paid to fund it is deductible.
Notes:
1 http://www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/netfile-impotnet/crtfdsftwr/menu-eng.html
2 For the sale of your principal residence on or after January 1, 2016, there is a new requirement to report the sale on your personal tax returns.
3 Requires approval of Form T2201.
4 You must have a doctor to certify that you have gluten intolerance.
5 Has to be at least 40km closer.