Opportunities for tax savings.
Claim all relevant deductions on your tax return
Investing time and effort as you prepare your personal tax returns can result in substantial tax savings. The following tips should assist you in identifying potential opportunities to reduce taxes and protect your family’s wealth. Since tax filing can be complex and ever changing, we recommend that you speak to your personal tax advisor prior to filing your return.
- Pension Income Splitting – allows a higher income spouse to allocate up to one half of their pension income to their lower income spouse.
- Carrying Charges and Interest Paid - provided these expenses are for non-registered investments and are not considered commissions, they may be deductible. Commissions may be deducted in calculating your taxable capital gains/losses.
- Child Care Expenses – claimable by the lower income parent who works or attends school, subject to certain limitations.
- Moving Expenses – you may be able to claim moving expenses where you moved closer to your place of employment or school.
- Employment Expenses – you may claim certain expenses to earn employment income. And, where you earn commission income the deductions available to you are increased but may be limited to your commission income.
Consider deferring certain discretionary deductions
If you expect your marginal tax rate to increase in the future, you may want to consider waiting until a future year to claim certain deductions to maximize your tax savings.
- Capital Cost Allowance (CCA) – The amortized cost of a capital asset is discretionary and may be carried forward for future use indefinitely.
- RRSP Deductions - You may contribute to an RRSP and have the investment accumulate on a tax-deferred basis. However, if you are in a low tax bracket and expect to be in a higher bracket in the future, you may want to consider deducting the contribution in future years when you may benefit from larger tax savings.
Utilize tax credits
Non-refundable credits reduce your federal and provincial taxes. In addition to the credits highlighted below, some typical credits are: basic personal amount, age amount, spouse or common-law partner amounts, pension amount, CPP and EI contributions, Canada Employment, Public Transit and Children’s Fitness Amount. Note that these credits may be subject to reductions or restrictions.
- Credit Splitting - if you have insufficient income to utilize certain tax credits you may be able to transfer certain credits to your spouse.
- Charitable Donations – combine your family’s donations and claim on one return. Unlike other non-refundable tax credits, the charitable donation credit operates on a two-tier credit system. For the 2015 tax year, the first $200 provides a Federal credit of approximately 15% and 29% for amounts over $200, plus Provincial credits depending on the province of residence. As a further planning note, you do not have to claim all of this year’s donations on the current tax year. If you expect your taxable income to increase in the future, it may be beneficial to carry the donations forward to use within the next five years.
- Medical Expense Credit - to maximize your credits, combine your family’s medical expenses and consider claiming them on the lower income spouse’s tax return. In addition, you are eligible to claim medical expenses for any 12 month period ending in the year.
The filing deadline for most individuals is April 30th, 2016. However, if you, your spouse or common-law partner carried on a business in 2015 then neither of you is required to file until June 15, 2016. However; if you owe taxes you should still pay your balance by April 30th, 2016 in order to avoid penalties and interest.
- Don’t wait until the last minute, gather and organize your receipts now - the more organized you are, the more likely you will remember to claim all your deductions and credits. Also, a well organized tax package will help you save money by reducing your tax preparation fees and speeding up any tax refund.
Remember to focus on opportunities to preserve wealth and save tax. The opportunities above are just one way that your Investment Advisor and our Tax & Estate Planning Team can help. Please note that these tax tips are general in nature, if you have questions about your specific tax situation please consult your Investment Advisor and a professional tax advisor.
To learn more, please contact your Investment Advisor and ask for copies of our complimentary educational reports on tax planning including the Tax Planning Checklist.