OFTEN OVERLOOKED DEDUCTIONS AND CREDITS
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Fund Library Q&A
Your questions about financial planning, investments, and portfolio management answered by an industry expert



By Robyn K. Thompson  | Friday, April 13, 2018




Q – There seem to be so many different tax deductions and credits and special exemptions when it comes to filing your tax return. I’d like to make sure I take advantage of everything that’s available. Do you have any tips on tax breaks that are most often missed by taxpayers filing their returns? – Monica D., Thornhill, Ontario

A – You’re absolutely right. There are in fact some 94 personal tax deductions and credits available, and not all apply to everyone. Many are indeed often overlooked, even if they do apply. Here’s a rundown of the most commonly missed credits and deductions. Consult with your tax preparer to see if they apply to you.

Medical expense deductions. You may claim only eligible medical expenses if you or your spouse or common-law partner paid for the medical expenses in any 12-month period ending in 2017 and did not claim them in 2016. Generally, you can claim all amounts paid, even if they were not paid in Canada. You can find a list of common medical expenses at the CRA website.

Annual union, professional, and other dues. This one is often overlooked because the amounts may be withheld from your pay or may be paid as an automatic withdrawal. But they can add up. The CRA lists the following amounts you can claim if they related to your employment and if you paid them yourself in the year or if they were paid for you and reported as income:

* Annual dues for membership in a trade union or an association of public servants.
* Professional board dues required under provincial or territorial law.
* Professional or malpractice liability insurance premiums or professional membership dues required to keep a professional status recognized by law.
* Parity or advisory committee (or similar body) dues required under provincial or territorial law.

Note, though, that initiation fees, licences, special assessments, or charges for anything other than the organization's ordinary operating costs do not count as annual membership dues. Neither do pension plan premiums, even though they may be shown on your annual slips as dues.

Moving expenses. You can claim eligible moving expenses if you moved to a new location for employment or business purposes, or you moved to attend college or university as a full-time student. To be eligible for the deduction, your new home must be at least 40 kilometres (by the shortest usual public route) closer to your new work or school than you were before.

Interest on student loans. Interest paid on your student loan in 2017 or the previous five years may be claimed as a credit by you or a related person. If you have no tax payable for the year, you can carry the interest forward for five years and claim it when you do have tax payable.

Childcare expenses are deductible from income where one or both parents 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. The maximum you’re allowed to claim under the childcare deduction in 2017 is $8,000 for each child under six at the end of the year, and $5,000 for each child over seven and under 16. The deductions cannot exceed two thirds of your earned income.

Employment expenses. You can deduct certain expenses (including any GST/HST) you paid to earn employment income, but only if you were required to pay expenses under the terms of your contract, did not receive an allowance for them, or if an allowance was included in your income. This deduction typically will not apply to most employees, and you cannot deduct the cost of travel to and from work or any other expenses, including tools and clothing.

However, the Tradesperson’s Tools Deduction lets employed tradespeople deduct the cost of eligible new tools over $1,178 purchased in 2017 to earn employment income as a tradesperson and as an eligible apprentice mechanic. A maximum claim of $500 applies.

Home Buyer’s Amount. You can claim $5,000 for the purchase of a qualifying home in 2017 if you or your spouse or common-law partner acquired a qualifying home and you did not live in another home owned by you or your spouse or common-law partner in the year you bought the home or in any of the four preceding years (first-time home buyer). The maximum tax savings generated by the non-refundable tax credit will be up to $750 (that is, $5,000 x 15%). This is also available to existing homeowners who qualify for the Disability Tax Credit and who purchase a more accessible home.

A qualifying home must be properly registered and must be located in Canada. Both existing homes and homes under construction qualify, and include single and semi-detached family houses, townhouses, mobile homes, condominiums, and apartments in duplexes, triplexes, fourplexes, or apartment buildings.

Legal fees. Certain kinds of legal fees can be claimed. These include fees paid to respond to or object to or appeal a CRA assessment, legal fees paid to collect a retiring allowance or pension benefit, and fees incurred to try to make child support payments non-taxable. You cannot claim fees you paid to get a separation, divorce, or establish custody of or visitation arrangements for a child.

Transferring tuition, education, and textbook amounts. The education and textbook credit was eliminated as of Jan. 1, 2017; however, you can carry forward unused amounts. The tuition credit is still applicable. If there is any amount remaining after a student reduced their own tax owing, they may transfer it a parent, grandparent, spouse, or common-law partner. Note that amounts for transfer cannot be carried forward from previous years and cannot exceed $5,000, less the amount the student used to reduce their own tax owing. Only one person can claim this transfer from the student, and it can be a different person each year.

As always, each person’s tax situation differs, and not everyone can claim every deduction or credit. See your financial advisor for more information on which deductions and credits you may be able to use to cut your tax bill.

Robyn Thompson, CFP, CIM, FCSI, is the founder of Castlemark Wealth Management, a boutique financial advisory firm specializing in wealth management for high net worth individuals and families. She is also listed as a MoneySense Approved Financial Advisor. Contact her directly by phone at 416-828-7159, or by email at rthompson@castlemarkwealth.com for a confidential planning consultation.

Notes and Disclaimer

© 2018 by the Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned are illustrative only and carry risk of loss. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please contact the author to discuss your particular circumstances.

   
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