Unless you’re a bit bent, wildly weird, or an accountant, filing taxes tends to fail on the Fun-O-Meter. OK, tax nerds probably enjoy Canada’s tax code too. Kudos.
I failed. Sorry.
But in under 6 minutes I shared a few untaxing tips that could help you cut a smaller cheque to the Canada Revenue Agency before the April 30th, 2016 deadline. Now, get filling.
— The Exchange (@ExchangeCBC) April 27, 2016
1. Last chance for these tax breaks.
The recent Liberal budget phased out a number of juicy tax credits, so take full advantage of these breaks while you can.
Kids and Family:
Children’s Fitness Tax Credit. If you registered your kids for swimming lessons, hockey, ballet or another approved fitness activity you can claim up to $1,000 per child under age 16. The Children’s Fitness Tax Credit is a refundable credit to a maximum of $150. I’m into it ‘cause my daughter’s gymnastics ain’t cheap.
Children’s Arts Amount. If your kids participated in arts-related activities, you can claim $500 per child under the Children’s Arts Amount for a non-refundable tax credit of up to $75 per child. Note: In 2016 these limits to both the Fitness Tax Credit and the Arts Amount will be cut in half, and then removed in 2017. To save tax dollars try to write cheques for these activities in 2016 rather than 2017.
Family Tax Cut. The 2015 tax return is your last chance to claim this income-splitting credit. The Family Tax Cut lets a higher-income spouse transfer up to $50,000 of taxable income to their spouse or common-law partner to save up to $2,000 in taxes. To qualify you’ve gotta have at least one kid under the age of 18. The Liberals ended this break for 2016 and onward.
Education and textbook credits. Full time students can claim up to $465 per month of study. I’m feeling pain for students because this break ends in 2017. Unused education and textbook credit amounts can be carried forward from prior years and can still be claimed in 2017 or later. Students can claim their tuition fees this year and onwards, so get the forms from your college or university to qualify.
Top marginal tax rate. Did ya earn over 200K in 2015? It’s the last year to benefit from a marginal tax rate with a high of 29 per cent federally. In 2016 the top marginal tax rate increases to 33 per cent. If you’re a breadwinner in this bracket, you’ll save money by reporting more income in 2015 and less in 2016. Deferring an RRSP deduction for a year can also save some tax cash.
2. Dumb tax mistakes (that we think are not mistakes)
Getting a tax refund is a big mistake. Why? Because you’re giving the government an interest free loan! How nice of you! Stop loaning your cash to the CRA for free by filing Form T1213 and requesting to reduce the tax deducted from your paycheque. You’ll avoid the refund next April while increasing your take-home pay. Make use of your money sooner!
Thinking your kid is too young to file. You’re never too young to start filing a return to the CRA. The bonus for kids earning even modest cash is they won’t pay tax on their 2015 income if it’s under $11,000, and filing a tax return builds RRSP contribution space which can be used in later years.
I started filing my own taxes WAAAY back in the day when I delivered a little paper called The PennySaver. While seated at the kitchen table my father instructed me to use my T4 and an HB pencil to fill out a simplified tax form with a million little boxes to declare my income and claim my RRSP contribution room. Sounds tough, but learning about paying taxes and earning money early in life are pretty solid lessons for later in life. So get your kids to file! Seriously!
Keeping all the tax credits to yourself. Don’t be Scrooge — failing to transfer credits to a family member can mean less money for the family. Several credits (such as: family caregiver, disability, and pension) can be transferred to your spouse if you’ve already reduced your taxes to zero. Students can share the tax love too by transferring up to $5,000 in tuition, textbook, and education amounts to a parent or grandparent. Sharing tax credits is a huge gift, kinda like Christmas in April. Kudos.
3. Take Away: Don’t file late!
Can’t Pay? File anyway! If you don’t have the cash to pay your tax owing, file by April 30th anyways! The CRA has a hefty late-filing penalty, which is pretty painful. The penalty is 5 per cent of your 2015 balance owing, plus 1 per cent of your balance owing for each full month your return is late — to a maximum of 12 months. Procrastination doesn’t pay!
Happy filing, folks!
Love, love, love,