Financial Advice
Charitable Donations
There are many tax-deduction possibilities with donations. The federal tax credit for donations is twofold: the first $200 entitles you to a small tax credit, while the remainder entitles you to a large tax credit. Considering that the donations of one spouse can be claimed by the other spouse, it is advisable that only one of the spouses claims all of the family's donations. That way, the lower tax credit bracket is applied only once, and the income tax payment is reduced.
There is another way to benefit from the large tax credit for donations: accumulating donations over several years and claiming them in one year only. Indeed, the tax credit can be applied for donations over a five-year period.
Remember that if you have donated stocks, bonds or mutual fund investments, only 25% of the capital gain resulting from this can be included in your income.
Medical Expenses
The tax credit for medical expenses depends on income thresholds. The lower your net income, the more eligible medical expenses you can claim. Since medical expenses can be claimed by one spouse only, it is advisable that they be claimed by the spouse with the lowest income. Remember, though, that the credit is not repayable. The spouse claiming the credit must have a large enough income to fully absorb the credit.
Moreover, if you have taken care of an aged parent, grandparent or handicapped dependent, you may be able to claim the caregiver tax credit.
Business Owners
As a self-employed individual, you may claim numerous business expenses that will lower your income tax. Make sure to claim all the eligible expenses, such as the following: automobile expenses; parking fees; professional memberships; home office expenses, if applicable; representation expenses; conference expenses (not more than two per year); cell phone expenses; computer amortization; and associates' wages, including to family members. A couple of things to remember – in most cases, you can deduct private medicare premiums as business expenses rather than medical expenses, and half of your contributions to C/QPP as a self-employed individual are tax-deductible rather than eligible for a tax credit.
A word of caution : if you claim expenses for a home office, you should not claim value loss for that part of your home occupied by the office. This is because you will lose part of the protection against taxation of the capital gain at the time of the sale of the principal residence.
Don't Throw Away Your Old Receipts
When organizing your information, you may find some old receipts that you could claim on your next income tax return. In particular, claiming charitable donations can be postponed for five years, and you can claim them any year during that period. Medical expenses from a previous taxation year can be claimed, as long as the total claim covers a period of twelve months that ends in the taxation year when the claim is made.
Moving
If you moved in 2011, some of your expenses can be claimed if the move was to start a new job, to start a business or to attend college or university. You could claim the cost of actually moving your personnel belongings, your transportation costs and your meals and accommodation costs en route to your destination. Other expenses that could also be deductible are the following: penalty for cancelling a lease, expenses to sell your house, and up to $5,000 in expenses incurred to maintain a home not already sold at the time of the move. However, expenses can only be claimed against the revenue from the new job or business. If revenue from the new job is not sufficient to claim all expenses, the remaining expenses can be carried over to the next taxation year.
Filing Income Tax Returns for Students
Most of the time, students don't have to file an income tax return, even when they earn money. However, it could be well-advised to do so. No matter the revenue source – part-time job, babysitting, snow removal, mowing lawns – filing an income tax return allows them to declare revenue and thus to establish their right to contribute to an RRSP. Those contributions can be made at any time in the future.
Filing an income tax return also makes the individual eligible for some refundable tax credits. Several provinces offer such tax credits to low-income taxpayers and no-income individuals. When there is no provincial tax to be paid, the tax credit is paid up to the individual.
Allowable Business Investment Loss
You might be able to claim a business investment loss if you invested money in a small business – to help a friend or a family member to start a business, as an example – and you received nothing in return but a valueless share or note of hand. This "allowable business investment loss" is similar to a capital loss because only 50% of the loss is deductible. However, it differs from a capital loss because it doesn't have to be claimed against capital gains only, but can be claimed against any revenue source for that taxation year.
Capital Loss Carryback Report
Capital losses may only be claimed against capital gains. If you experience a net capital loss for the year, it can be carried back over three years, or carried forward indefinitely. Capital losses in 2011 would bring greater tax reduction if they were claimed against gains of 2008. The amount of tax recovery depends on the taxation level on net capital gains for a particular year. If you remember well, in 2000 capital gain claims went from 50% to 75%, depending when they were realized that year. Claiming capital losses for a year when the allowable levels were higher will produce a higher tax recovery.
Consider Electronic Filing If You Expect a Refund
It takes much less time to process electronic filings than paper returns. If you are eligible for a refund, you can expect to receive it in about two weeks if you filed electronically, compared to six to eight weeks for paper filing.
