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Most Overlooked Tax Breaks: Are you missing out on these deductions?
1. Equivalent-To-Spouse Credit
The equivalent-to-spouse credit can be claimed if you are single, divorced or separated. It is calculated the same way as the spousal credit with some restrictions. • If the dependent is not a child, he or she must be a Canadian resident. If a child is claimed as a dependent, he or she must have been under 18 years of age at least in part of the tax year, unless the child is mentally or physically infirm. • Only one dependent can be claimed under the equivalent-to-spouse credit. • Only one claimant is entitled to credit with respect to any particular dependent. o The credit cannot be claimed in cases where the taxpayer is subject to court-ordered support obligation. To be eligible, it is not necessary that the dependant have lived with or been supported by the taxpayer for the entire year.
2. Charitable Donations
The CRA allows a federal tax credit on charitable donations of 15% for the 1st $200 and 29% on amounts over $200 up to a maximum of 75% of net income. Spouses can pool their contributions to maximize the tax break. Furthermore, contributions need not be claimed in the tax year they were made, but can be carried forward for up to five years. Donations under the $200 limit can be accumulated and claimed in later years to qualify for the higher credit allowance.
3. Childcare Expenses
Childcare expenses are deductible from income where both spouses, or spouse, in the case of single parent families, are working or where one spouse is attending school for all or part of the tax year. Childcare expenses can include daycare fees, boarding school, hockey school, or summer camp fees. If both spouses are working, the lower-income earner must claim the deductions. If the lower income earner is a full-time student, the deduction is available to the higher earner for the number of weeks the spouse attends school. The maximum you’re allowed to claim under the childcare deduction is $7,000 for each child under seven at the end of the year, and $4,000 for each child over seven and under 16. For children with disabilities, you can deduct up to $10,000 starting in year 2000. The deductions cannot exceed two-thirds of your earned income.
4. Medical Expenses
Non-reimbursed medical expenses can be claimed as a non-refundable tax credit. Medical expenses may also be claimed for dependants other than a spouse or common-law partner. The expenses eligible for the medical expense credit are quite lengthy. Refer to IT519R2 or other CRA publications for a complete list. Married or common-law couples are allowed to pool their claims together. Taxpayers claiming medical expenses should be sure to include all receipts with their returns. You can deduct the premiums you paid for medical coverage, including Blue Cross or Green Shield private coverage and amounts deducted for employer plans. Your employer can give you a statement of what you paid for your medical plan. The CRA allows you to load up your claims for any 12-month period ending in the year of the tax return. This means you can choose the period that will result in the highest yield for you. This applies to expenses like eyeglasses and certain dental work. If you accumulate your claims within the same 12-month period you can maximize the tax benefit of the credit.
5. Disability Credits
A federal tax credit of 16 per cent on $6,279, or $1,005, is available for taxpayers with severe and prolonged mental or physical infirmity. To qualify, a Canadian medical doctor must certify to the impairment on Form T2201. Professionals other than a doctor may attest to the disability. An optometrist can verify sight impairment or an audiologist can certify an individual’s hearing loss. A taxpayer’s physical or mental disability can be confirmed by respectively, an occupational therapist or psychologist. The impairment is considered severe if it restricts the person in their daily living activities. If such things as walking, speaking, feeding or dressing oneself, for example are affected for a continuous period of at least 12 months, then the infirmity satisfies the purposes of the tax credit. The disability tax credit extends to individuals for whom a medical doctor has prescribed therapy at least three times a week or an average of at least 14 hours, as treatment for a disability of a basic activity of their daily living.
6. Carrying Charges
These include a variety of expenses associated with financing charges and investment expenses, such as: • Interest on loans for investment purposes. • Interest charged on the purchase of Canada Savings Bonds through your employer’s payroll deduction plans. • The cost of renting out a safety deposit box. • Fees paid to financial plans and investment advisors.
7. Moving Expenses
If you move within Canada, your moving expenses might be an allowable tax deductible. You must be employed, and your new location must be at least 40 kilometers closer to your place of work. Starting a business would qualify, as would moving away from home to take your first job. If the deductions are greater than earned income, they can be carried forward for one year to realize the full tax benefit. Expenses that can be claimed include hiring movers or renting a van to move yourself, breaking a lease, furniture storage, meals and lodging for you and your family while traveling and legal fees and real estate commissions if you have to sell your home.
8. Self-employment Expenses
If you are using your house as part of your business - a home office for example - you can claim a deduction for that part of the home that is used to conduct business activities. If you are a homeowner you can claim a portion of your mortgage interest, property taxes and capital cost allowance. If you are a renter you can claim a portion of your monthly rent. You can include in your deduction a share of the utilities, insurance or home maintenance allotted to the area of the house set aside for business use. For each of these expenses you can claim a percentage equal to the percentage of your home that is reserved for business. t use these items to create a loss that could be deducted against other sources of income, however. Of course, any expenses solely related to the business, such as supplies, travel and client entertainment, are fully deductible. CRA forms T2124 and T2032 contain a guide entitled "Calculation of Business-Use-of-Home Expenses" that will help you calculate your allowable claim.
Source: Tax Management Centre