Year End Tax Planning Steps for Individual Taxes.

There are so many tax planning steps that you can take to be better prepared for your taxes of 2016.Few of the common steps are suggested as below:

Donation/Charity Tax Credit:

In case if you want to avail of the donation/charity tax credit, please ensure that you donate on or before December 31 to take a tax credit on your taxes. Donation tax credit is allowed @ 15% on the first $200 amount donated and thereafter the same is at the highest federal tax rate which is 29%.Few things should be noted with regard to the donation credit:

1)      Donation given by both the spouse are clubbed together for tax credit at the higher rate

2)      Donation made to the Registered Charity in Canada, Canadian Municipality, United Nations or an agency thereof or A Registered Canadian Amateur Athletic association qualifies for the tax credit.

3)      Donations can be claimed for any five years from the date of the donation. Obviously, it cannot be claimed twice.

4)      Please remember that the donations made to the Provincial police, lottery tickets or charity tournaments tickets purchased will not qualify you for this credit.

5)      In case if you are donating for the first time in last five years, you could be entitled to an additional tax credit @25% on the first $1,000 donation.

6)      You must obtain the proper receipt for its claim. You can also check from CRA’s website whether a particular charity is a registered one or not.

Medical Expenses:

You can claim medical expenses for any 52 weeks period ending in the current taxation year. However, the medical expenses that can be claimed have to be for the prescribed medicines. Also, the claim has to be reduced by the amount of reimbursement received by you either from your employer or insurance company or others. Vitamins and other health supplements are not entitled for the credit medical expenses.

Pl. make sure that you have the adequate supporting for the expenses claimed. Medical expenses that can be claimed are not necessarily the drugs tablets in the traditional sense but it also includes things like crutches, voice recognition software, travel and meal expenses necessary for medical treatment, note taking devices, voice recognition software and real time captioning for individuals with speech or hearing impairment, cost of rehabilitative therapy etc. 

You can claim the entire family’s medical expenses i.e. for you, your spouse and under 18 years of age children living with you (if any). Generally, it is beneficial for the lower income earning spouse to claim the medical expenses for larger tax credit since expenses over 3% of the net income can only be claimed on your tax return.

Child Care Expenses:

You can claim the child care expenses incurred for the purpose of earning income or for carrying out self-employment or for full time study. There are some criteria for computing the deduction. However, please make sure that you have the proper receipt to substantiate your claim of deduction and you should obtain the same immediately after the year end from the child care provider. You need the Social Insurance Number of the person if the child care provider is an Individual.

Public Transit Amount Credit:

Federal Government of Canada gives you the tax break for a monthly or weekly public transit passes (allowing unlimited ride on the week end).Tokens are not entitled for this tax credit. Hence, this includes train, bus and other forms of public transportation rides for the purposes of this tax credit. In case if travel by Presto Transit, you can print out the monthly journey reports from its website and you are entitled to the credit if you have more than 32 rides in a month.

Pl. make sure that you preserve all the monthly passes or print out the statements for the purposes of the tax credit.

Rent Credit In Ontario:

Ontario Province provides monthly benefit to you in case if you paid rent on Ontario and your family income is lower than the prescribed amount.

Therefore, it is advisable to obtain your rent receipt after the calendar year end. The rent receipt should contain the name, address and the contact number of the landlord, period of renting, and the address of the place rented, amount paid for the calendar 2016 and the name of the tenant among other details.

One consolidated letter can also be sufficient for the above purpose.

RRSP Investment:

In order to reduce the tax owing or increase the tax refund, you can make your investment in Registered Retirement Savings Plan (RRSP).However, this investment is subject to the limit and that can be found on CRA’s Notice of Assessment of last year. In case if you make investment over the limit, you are subjected to 1% per month penalty and interest on it.

You have time up to February 28, 2017 to make RRSP investment and deduct it on your 2016 tax return.

Make sure that you obtain the tax receipt for such a RRSP investment.

Superficial Loss:

In case if you incur the loss on the disposition of any asset and within a 30 days period (before or after the disposition), you buy back the same or identical asset then the capital loss is not allowed to be deducted on your tax return. Therefore, please make sure that you buy back the asset after a period of 30 days in order not to attract this provision. This mostly happens in the case of buy back of shares or securities.

Another round of Tax planning measures will be sent later.

Disclaimer: Any discussion on this blog relating to tax matters is purely for educational purposes and not taking any specific actions based the general tax rules described therein. Your tax situation could be different and as a result there may be different tax strategies applicable in your case. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situations or problems, you are advised to seek professional advice.