Tax Planning Tips
There are many legal ways to get a refund on taxes you have paid or to reduce the taxes you should pay.
Who needs to file a tax return?
All residents of Canada: Canadian Citizens, Landed Immigrants, any person legally residing in Canada, must declare their income by April 30 following the end of a tax year. Deadline to file income tax for self-employed and small business owners is June 15, but any taxes and HST owed must be paid by April 30. Even if you didn’t earn any income, you still need to fill out a declaration in order to receive GST/HST credit, Child Tax benefits and provincial property tax credits.
Remember to keep all receipts you are claiming in the tax return for 3 years. If you had a business income or rental income all receipts should be kept for 7 years.
Taxpayer should claim in tax return, childcare expenses paid in the taxation year. There is a maximum amount per year per child that can be claimed:
- $8,000 per child younger than 7 years old
- $5,000 per child 7-16 years old
- $11,000 per child with a disability, to whom Disability Tax Credit Certificate was issued by CRA
There is a tax credit for post-secondary education at a college or university. Student needs to obtain form T2202 from the educational institution. In recent years the receipts are no longer mailed to the students. Instead a student needs to log-in to his student account at his educational institution, find TAX FORM T2202 and print it. Most private colleges do not issue a T2202 form. If you are not sure that a private college you attended is qualified by the Ministry and Education for tuition credit, check online at http://www.tcu.gov.on.ca/eng/postsecondary/schoolsprograms/
Anyone who attended a post-secondary institution can claim the credit, even if tuition was paid by someone else: parent, employer, OSAP, given as a grant, or money was borrowed. If you borrow money, interest on student loan can also be partially returned to you. You should provide the receipts.
You may claim a credit for any non-reimbursed medical expenses. You can get a refund of expenses in excess of the lesser of: $2,302 or 3% of the net income for the year. You may carry forward unused expenses to the following tax year. In any tax year a taxpayer can claim medical expenses for 12 consecutive months period that was over in the tax year. For example, expenses accrued during the period of November 15, 2017 to November 14, 2018 can be claimed in your 2018 income tax.
RESP - Registered Educational Saving Plan will not affect your taxes, but helps to save money for your children’s post-secondary education. Instead of parents paying taxes when money will be withdrawn for education, children will pay taxes on the savings and normally at a lower tax rate. We do not claim any RESP contributions on Income tax, but RESP withdrawals should be claimed. Normally, financial institution will send you a form T4A for any RESP withdrawn.
Even if you are a full-time employee, but sometimes use your own car, telephone or home office to perform work duties, you may deduct those expenses. To be eligible for this, your employer must fill and sign form T2200.
Charitable donations will reduce your taxes. You need to keep receipts for any donations over $10.
Information for Newcomers
If you supported your spouse before he/she arrived to Canada, you may receive additional credit. Every taxpayer has a basic non-taxable amount on their income ($11,809 - Federal basic personal amount in 2018). If your spouse was not working, you claim an equal non-taxable amount for your spouse on your income tax.
If you have moved during the taxation year, closer to your new job or place of study and your new residence is at least 40km away from your previous residence, you may deduct some moving expenses.
Public Transit Amount
Taxpayers 65+ can save on taxes 15% from what you have paid for the passes. Keep all metro passes, VIVA, GO or any other public transportation monthly passes.
By contributing money into RRSP (Registered Retirement Saving Plan) we defer the taxes until retirement. The RRSP is just about the best tax shelter around. Not only is it government-permitted, but it's actually endorsed by the government, so an investor gets the benefit of a tax deduction for their contribution. There is no taxation until the money comes out of the RRSP. It generates you an additional tax return. You may use your RRSP savings:
- When you are buying your first home. You may borrow up to $25,000 from own RRSP for a down payment, but need to return the entire amount within 15 years.
- You may withdraw $10,000 per year to a maximum of $20,000 for life to pay for your education. Money should be returned back into the RRSP within 10 years.
The maximum amount you can contribute into your RRSP can be found in your Notice of Assessment. If any RRSP was borrowed, the amount that needs to be repaid will be printed on your Notice of Assessment as well.
Tax Free Saving Account - TFSA
Tax-free savings accounts are available for Canadian residents who are 18 years of age or older. The benefit of depositing money to TFSA is to grow your investment income (interest, dividends, trust distributions and capital gains) free of tax. There is no deadline for contributions to a TFSA, as the unused contribution room is carried forward into the next year. However, important to remember: any withdrawal made during the year can be re-contributed into your TFSA in the same year only if you have the available contribution room. Otherwise you can re-contribute at the beginning of the following year. For more information check CRA website: TFSA.
The income from operating a business has to be included in your income and the Income Tax Act allows certain expenses. These are the expenses incurred to earn income from the business, and are used to reduce the amount of business income to be included in your tax return. Business related expenses include advertising, licenses, subscriptions, telephone, home office, Internet and so on. You may pay your children to perform work for you, such as bookkeeping and filing. Normally, any employment income earned in the year for which T4 or T4A was not issued is considered self-employment/business income.