It’s tax time again. If you owe tax, you must file your 2013 tax return before midnight on April 30, 2014 or risk unnecessary penalties. That means that now is the time to look into ways to lighten your tax burden.
“Nobody wants to pay more than they have to in taxes. Take some time to learn about the tax savings opportunities available to you before you file your taxes this year,” says Keith MacIntyre, national tax leader for the accounting firm Grant Thornton LLP.
To help you out, Grant Thornton has shared a dozen tips that might help you save money this year, as well as some other tax matters you should be aware of:
File your tax return and pay your taxes on time: To avoid interest and penalties, any income tax you owe should be paid by no later than April 30. If you are self-employed, you have until June 15 to file your income tax return, but any taxes owing must still be paid by April 30.
Review your tax strategy if you’re getting a refund: Although you may look forward to receiving a tax refund, it’s not always good planning to get one. If you get a refund, it means the government has been holding your money without paying you interest, sometimes for many months. If you’re getting a refund this year, you may be able to apply to the CRA to obtain permission to have your source withholdings reduced.
Children’s fitness and arts credits: If you have children under the age of 16 at the beginning of the year, you may claim a tax credit of up to $500 for eligible fitness expenses paid for each of your eligible children. Up to another $500 can be claimed for eligible arts expenses. If you have a disabled child, the age threshold is extended to 18 years and the maximum credit is increased to $1,000.
Claiming after-school programs as child care: After-school programs for your child can qualify as an eligible childcare expense if it allows you to work. For example, if you would need to arrange care for your daughter if she wasn’t in an after-school gymnastics program, this may be claimed as a childcare expense. A program that qualifies for the children's fitness or arts tax credit can be eligible for the child care expense deduction. However, you can’t claim a childcare expense and a fitness or arts credit for the same payment. You must first claim the allowable amount for purposes of the child care expenses deduction, and then any remaining balance may be used for the children's fitness or arts credit.
Maximize tax credits for charitable donations: For 2013, the federal credit is 15% on the first $200 of donations, and 29% on the rest. If you and your spouse1 collectively donated more than $200 last year, the tax credit will be larger if only one of you claims the entire amount. There is now also a new “super credit” for first-time donors. If you and your spouse have not claimed any charitable donations since 2008, you are eligible to claim this credit which provides for an additional 25% tax credit on up to $1,000 of donations. This new super credit can only be claimed once in the 2013 to 2017 tax years.
Include any medical expenses you pay for dependants other than your spouse or minor child: If you pay medical expenses for certain related persons who are dependent on you for support at any time in the year, don’t forget to include these amounts on your tax return. This can include amounts you pay for an adult child, grandchild, parent, grandparent, brother, sister, uncle, aunt, niece or nephew of you or your spouse. Medical expenses paid for such relatives must first be reduced by 3% of that dependant’s net income, to a maximum of $2,152 in 2013.
Claim capital losses to offset capital gains realized in the past three years: If you realized a capital loss in the current year in excess of current year capital gains, check to see if you reported a capital gain in any of the three previous years. Capital losses can be carried back for up to three tax years and forward indefinitely.
Don’t forget about pension income splitting: If you’re receiving certain pension income, you’ll be able to allocate up to half of that income to your spouse. To qualify for pension income splitting, the pension income must satisfy certain criteria. For example, although it includes lifetime annuity payments under a registered pension plan, it doesn’t include payments under the Canada Pension Plan (CPP) or Old Age Security (OAS) payments.
About to turn 65? Consider if you should defer receiving your OAS benefit: You can now voluntarily defer receipt of your OAS for up to 5 years. This will allow for a higher, actuarially adjusted, annual pension when you finally do start to receive it. This strategy may be beneficial if your income is at a level that would otherwise subject you to the full OAS clawback (just under $115,000).
Employed or self-employed and already collecting CPP benefits? Consider if you can opt out of the requirement to pay CPP premiums: If you are under age 65, you have to pay CPP premiums on your employment or self-employment income even if you are already collecting CPP benefits. However, if you’re between the ages of 65 and 70 and self-employed, you can opt out by completing the “Election to stop contributing to the Canada Pension Plan”, which is included on Schedule 8 of your personal tax return. Employees who want to opt out must complete Form CPT30 and provide a copy of the form to each of their employers. The original must be sent to the CRA.
Don’t forget your foreign reporting requirements: If you’re a resident of Canada, you must declare your income from all sources—Canadian and foreign. In addition, if the total cost of your specified foreign property exceeds CAN$100,000 at any time in 2013, you have to report certain information about your foreign investments on your tax return (Form T1135). The rules are complex and there can be significant penalties for failing to file the form or include complete information.
Be aware of your US tax obligations if you’re a US citizen or green card holder: If you’re a US citizen or green card holder living in another country, you continue to be subject to US income and estate tax laws. As well as being required to file an annual US tax return, there are other US financial reporting requirements—and significant penalties for failing to comply.
For more great tax tips for individuals—as well as businesses—Grant Thornton is offering a free downloadable Tax Planning Guide on their website. It also includes tips for businesses and investors.
Grant Thornton LLP also has tax experts across the country available to speak with media this tax season.
About Grant Thornton LLP in Canada
Grant Thornton LLP is a leading Canadian accounting and advisory firm providing audit, tax and advisory services to private and public organizations. We help dynamic organizations unlock their potential for growth by providing meaningful, actionable advice through a broad range of services. Together with the Quebec firm Raymond Chabot Grant Thornton LLP, Grant Thornton in Canada has approximately 4,000 people in offices across Canada. Grant Thornton LLP is a Canadian member of Grant Thornton International Ltd, whose member firms operate in close to 100 countries worldwide.
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1 Any reference to “spouse” also includes a common-law partner.
- Grant Thornton LLP
Tania Freedman, 416-607-2745
Senior Manager, Media Relations