The April 30 tax-filing deadline is fast approaching. When filling out your return, make sure you take advantage of all the exemptions, credits, and deductions available to you. Here’s a summary of some of the key tax breaks.
Personal exemptions are the most commonly known credit and available to everyone who files a tax return. For 2011, the federal Personal Exemption is $10,527. This amount is also available for your spouse or in the case of a single parent, can be used for one dependent child. Dependent children born in 1994 or later create a credit of $2,131 per child.
Canada Pension Plan contributions and Employment Insurance premiums deducted from your paycheques are also eligible for a tax credit, but check to insure you have not overpaid these payroll deductions. A refund of overpayments beats the tax credit. Every person with employment income in 2011 is entitled to the Canada Employment Amount of $1,065.
Medical and medically related credits are also available and in most cases can be maximized to the best overall benefit of the family. Not only are credits available for “regular” medical expenses, but additional credits for Disabilities and Caregivers, depending on the individual situation, may be available.
Pensioners will want to utilize the Pension Income Credit of $2,000 as well as the Age Credit of $6,537 if born in 1946 or earlier. Also, make sure that Pension Splitting provisions are being fully used.
Post-secondary tuition, education and textbook amounts offer not only lucrative tax deductions, but are also transferable to a supporting spouse, parent, and grandparent, or may be carried forward for use in future years by the student. The student controls which person can claim the credit, regardless of who actually pays the tuition by signing off on the back of the tuition slips ( that is, Form T2202A supplied by the post-secondary institution).
Student loan interest, monthly public transit passes, children’s fitness and arts amounts, and the new Ontario Children’s Activity amount round out the more common tax credits.
Credits that are not as well known are often left on the table and simply not claimed. Homebuyers may qualify for the Home Buyers’ Tax Credit if they have not owned a home for the four preceding years.
Tax credits for adoption expenses is also available up to a maximum of $11,128 and maybe claimed in the year that the adoption of a child under 18 is finalized.
Credits for overseas employment, political contributions, and investments may be available.
In order to make sure that you are paying the least amount of tax allowable by law, you do need to know what tax credits are available, how they can be applied, and their effects on other family members. If in doubt about whether a credit applies to you or how to make the most of available amounts, ask your tax advisor.
Alan Rowell, DFA is founder of The Accounting Place, and specializes in working with individuals and small- to medium-size businesses to provide customized accounting and taxation services. He is recognized as one of the leading tax services specialists in Canada, and is a tax resource for a number of financial planners. He is also a frequent guest speaker has written widely on tax planning. Alan is a Strategic Educational Partner, Faculty Member, and Instructor with the Knowledge Bureau.
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The foregoing is for general information purposes only and is the opinion of the writer. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. However, please call the author to discuss your particular circumstances.
