With tax season around the corner, it’s time to start thinking about your tax return. here are a number of ways to reduce the amount of tax you owe and save your hard-earned money at tax time. Below, we share 10 tax tips and 5 changes to keep you tax savvy this season.
10 Tax Tips
- Plan ahead: Register for My Account, gather your receipts and NETFILE access code, and sign up for direct deposit before April 30. Preparation will make filing your return pain-free, and help you avoid having to pay late-filing penalties.
- For Families: Piano lessons, Hockey fees, tutoring and more could save you tax on your return – so save your receipts!
- TFSA: You don’t pay any tax on income from your Tax Free Savings Account. Start saving today!
- RRSP: Any income earned in your registered retirement savings plan is exempt from tax, as long as the funds stay in the plan. RRSPs help you save for your retirement and give you a break at tax time too. Make sure to add contributions by March 31 to save on this year’s tax return.
- Public transit tax credit: If you or someone in your family is a regular user of public transit, then you may be able to claim a non-refundable tax credit based on the cost of eligible transit passes.
- Pension income splitting: If you receive income from a pension, you can split up to 50% of eligible pension income with your spouse or common-law partner to reduce the taxes that you pay.
- Students: Students can claim the tuition, education, and textbook amounts of their current school year. And recent graduates may be eligible to claim the interest paid on student loans.
- Child care expenses: Claim child care expenses that you or your spouse/common-law partner paid so that either of you could work, do research, or go to school.
- Home buyer’s tax credit: If you’re a first-time home buyer you may be eligible to claim $5,000 on the purchase of your new home, which can save you up to $750.
- Self-employed? A salary paid to an employee registered in a prescribed trade in the first two years of his or her apprenticeship contract qualifies for a non-refundable tax credit for the employer.
5 Changes
- Many personal income tax credit and benefit amounts are being indexed to inflation: The basic personal amount rises to $12,069
- The TFSA Contribution: The annual contribution limit to tax-free savings accounts will increase to $6,000 from $5,500
- CPP will go up, EI down: Starting in January 2019, Canadians’ Canada Pension Plan contributions increase from 4.95 per cent to 5.1 per cent on earnings between $3,500 and $57,400. It’s the first of five years of graduated increases running until 2023, when the rate will reach 5.95 per cent. Partially offsetting that increased CPP contribution on your paycheque will be a drop in Employment Insurance premiums, from $1.66 to $1.62 per $100 of insurable earnings.
- Small businesses will see a cut: As of January 1, the small business tax rate is going down from 10 to 9% – but the government has but a cap on “passive income.” Business owners can generate up to $50,000 in passive income before they start to lose access to the advantageous 9% small business tax rate. The federal government’s goal is to encourage business owners to reinvest their passive earnings into their businesses
- Gas Prices will go up: Ottawa will levy a tax on fossil fuels of $20 per tonne of greenhouse gas emissions starting in the new year, rising by $10 each year to $50 a tonne by 2022. This will likely mean the cost of a litre of gasoline will go up 4.42 cents.
Let us take the guessing out of your tax return preparation. A strong planning process is the best way to ensure you get the best return possible. Our tax planning services for individuals and organizations draws upon decades of experience and specialized industry expertise to help our clients navigate Canada’s complex tax laws. We stay current on existing and pending legislation to catch opportunities, address risks, and help our clients achieve their goals.