Apr
30
By Fin MacDonald
Now that you have your refund for your 2011 taxes (or have had to pay), it's time to look at some tax planning ideas.
For Seniors
Instalment Payments
You are required to make Instalment Payments if for 2 of the last 3 years you owed at least $3,000 when you filed your tax return. If you fall into this obligation you will have to make quarterly payments based on your net tax owing for the previous year.
For some, making instalment payments is a way of 'pay-as-you-go' and not having to pay $3,000 on April 30th.
If you are confident managing your money, have some more deducted off your RIF or a pension to bring the net tax owing below $3,000. For example, if your net tax owing is $2,900 then no instalments are required and you have the use of the $2,900 for the entire year.
Pension Splitting
Pension Splitting has been allowed since 2007. If you have not taken advantage of it, you may go back up to three years to make your claim. Besides splitting income it also allows the other partner to claim a Pension Income deductions - Saving on taxes in two ways!
Medical Expenses
Medical expenses do not need to be claimed on a Calendar basis. A claim may be made taking any day in the year and going back 365 days. For example, if you have dental expenses that start in November and go to March, this would be a time to make a non-calendar year claim.
Some common expenses that are overlooked include eye glasses and contact lenses, cataract surgery, non-government extended medical insurance, travel medical insurance and dental insurance.
Lastly on medical expenses; Claim ALL the expenses for the couple or family on one return to maximize the deduction.
Charitable Donations
The first $200 of charitable donations earn a 15% deduction; everything above earns a 29% deduction. Charitable donations can be carried forward for upto five years. So, claim all the donations on one partner; if donations are small save them up for a maximum claim every five years.
For Employed People
Keeping more of your money monthly rather than getting a large refund is possible if you have regular outlays that are deductible. As with the question of Instalment Payments one's financial style determines the approach: Would you rather have $1,800 as a refund, say, or have an extra $150 per month in your pocket?
Form T1213 Request to Reduce Tax Deductions at Source
This form allows you to have tax deducted reduced if you have regular payments in any of the following areas:
RRSPs - you have a contract to have a defined amount taken from your savings account each month.
Child Care Expenses - your monthly payments can reduce your tax deducted at source.
Support Payments - if you have tax deductible support payments to a former spouse you can apply to reduce your tax deducted.
Employment Expenses - if you are required, for example, to use your car in your employers' business, the expenses can reduce your monthly tax deductions.
These are the main deductions, other are also available.
Transfers from children
If you have children in post-secondary school, upto $5,000 per year of credits can be transferred to you. If you are in the top tax bracket (43% in BC) this can save you over $2,000 a year in taxes. By contrast, your child would be unlikely after graduation to be in a high tax bracket, so the savings she/he would receive would be much less.
Transfer from parents
Medical expenses not needed by your parents can be transferred to you. Before 2011 the transfer was limited to $10,000 per year. The limit is now gone. As I mentioned last month, Long Term Care expenses can quickly mount up; now more of these can reduce the tax load for the children.
Helping You to Keep More of Your Money is the theme of these columns. I hope you have found them useful.
Next month - June 15 the Self-Employed Tax Deadline.