For most Canadians, doing your taxes is as easy as sending in a T4 and tax return, but if you’re not paying close attention you may be missing out on precious savings. Aurèle Courcelles, director of tax and estate planning at Investor’s Group, says there are a number of deductions and credits that are easy to overlook. If you’ve already filed, here are some of the things you missed—and if you’re waiting until April 30 to file, make sure you don’t forget to claim or deduct everything you can.
Interest on income producing assets
If you’ve borrowed money to invest or own a rental property, you can claim the interest. It’s something that may be easy to forget, since you can’t claim interest payments on credit cards or your non-income producing property. But if you’re paying the bank every month for an investment loan, you can get a deduction. “You won’t get a slip,” says Courcelles, so make sure you ask the bank for a receipt.
Union or professional dues
Those pesky union or professional dues getting to you? You’ll be happy to know they can be deducted too. This only works if your employer is not paying for them, but for many lawyers, chartered accountants and other Canadians with a professional designation, these costs come out of pocket.
Good for students and workers. If you moved more than 40 km for a new job or school you can deduct those expenses. Everything from renting a U-Haul to hotel and meals are covered.
First Time Home Buyers Credit
Buying a home is stressful and costly, so you may not have been thinking much about tax time when you purchased your new abode. Now that you’re crunching the numbers though, make sure you claim the First Time Home Buyers Credit. As the name suggests, this only applies to Canadians who are buying their first place, and you had to purchase the home after January 28, 2009. You’ll get $750 back with the credit and “you can make as much or as little as you want, as long as you bought a house,” says Courcelles.
Many Canadians have the misconception that all our healthcare related needs are covered. Not so. We still pay for medicine (if an employer doesn’t cover the full amount), some or all dental costs, extra doctor fees, orthodontists, chiropractors and the list goes on. If your bills exceed 3% if your net income, or $2,011 — whichever is less — you can claim those expenses.
Courcelles says it’s best to pool these expenses onto the lower income spouse’s return, so that 3% will be exceeded quicker than if it was on the higher earner’s return. It’s important to note that you can only claim what you pay yourself. If an employer covers 80% of medical expenses, you can only claim the other 20%.
Eligible dependent credit
This one applies, in most cases, to single parents. If you’re raising family without a partner — whether you’ve been divorced, widowed or are a single parent — you can get this credit. The eligible dependent amount is $10,320 minus the dependent’s income. “If you have a 5-year-old child who has no income you multiply the $10,320 by 15% and that’s your credit,” says Courcelles. This also works for child support payments, and you can claim the credit if your spouse makes less than the eligible dependent amount.
Three tax tips you already know about, but a reminder never hurts
Don’t file late!
It seems like a no-brainer, but make sure you send that return in by, or on, April 30. Patricia Lovett-Reid, senior vice-president with TD Waterhouse, says the Canada Revenue Agency will charge you 5% on your balance owing plus 1% every month it’s late after that.
Capital losses and gains
If you sold your stocks before the market recovered last March, there’s a good chance you incurred capital losses. You can offset any gains you made with losses in the previous three years. So, if you were hit with gains in 2009, use your losses to offset those costs. If you can’t use the capital losses, you can carry them forward indefinitely — so when you have a good year in 2010, you won’t have to stress over any capital gains.
You had to do this in 2009, but don’t forget to indicate how you allocated your pension. A few years ago the government allowed retirees to transfer up to 50% of their pension to a (presumably) lower income spouse. That, theoretically, should even up the spouses’ tax brackets, translating into less tax paid on a whole.