It's
almost tax time again, and everyone is always hunting for hints on how
best to complete their taxes. To make tax time easier, here are a few
practical tax tips everyone can use.
Business owners and employees
1.
Because interest paid on a business or investment asset loan is tax
deductible, use borrowed money to purchase business and investment
assets, and use your personal cash to purchase personal use assets,
such as a house or vehicle.
2. You can deduct certain
employment expenses required by your employer, including accounting and
legal fees, allowable motor vehicle expenses, parking costs, supplies,
in-home workspace expenses and office rent.
Spouse and family
Remember: Dependants include your children and other family members, such as elderly parents.
3.
Tuition: Students often don't need to claim all of their tuition fees
to reduce their tax payable to zero. Consider transferring some or the
entire unused portion to a parent or grandparent. Also, students can
carry forward student loan interest for up to five years; so if you
paid interest in years dating back to 2001 and didn't claim it on a
previous tax return, claim it now.
4. You might be able to
claim all or part of the Caregiver Amount if you had a grandparent or a
mentally or physically infirm dependant who is 18 or older living with
you and had a net income of less than $16,989.
5. Family tax
credits: Items such as donations and medical expenses can be claimed on
any family member's return, so compile and file them on the return of
the person who would most benefit.
Software
6.
Try tax software. It's faster to prepare your return than pencil and
paper, and if you NetFile, you will receive your refund in as little as
eight business days. Software will import data from the previous year
and from personal finance software or bank records, check for missed
deductions and verify your math. Some of today's better software
offerings even have RRSP optimizers to help you make the most of
contributions.
Medical expenses
7.
Maximize your family's claim. Medical expenses must exceed three per
cent of your net income in order to be claimed; so claim all medical
expenses for you, your spouse/common-law partner and your dependants on
a single tax return. Software such as QuickTax automatically combines
medical expenses and charitable donations and claims them on the most
advantageous return.
8. Claim travel. If you have to travel
more than 40 kilometres for medical treatment not available locally,
you can claim your travel costs as medical expenses. If you traveled
more than 80 kilometres, you can claim accommodation costs as well.
Eligible travel expenditures include meals, vehicle operating expenses
and a reasonable portion of vehicle ownership expenditures.
Charitable donations
9.
Since the rate at which you are able to claim your charitable donations
nearly doubles for amounts over $200, do not claim less than $200 of
charitable donations in any year. Donations can be carried forward for
up to five years, so lump all your small donations into one large
donation every few years.
Maximize your RRSP
10.
Only one-third of eligible Canadians contribute to RRSPs, but that
number is rising as Canadians look to shelter income and make the most
of their money. Leading tax software packages help optimize
contributions. For example, the QuickTax Scenario Analyzer allows users
to compare numerous 'what if' contribution scenarios and select the
version that delivers the maximum return. It will even compare returns
against those of a spouse to determine who would receive the most
benefit from claiming a dependant's RRSP contributions.