Banka: Year-end is time to focus on filing a tax return
There are several things that you can do to reduce your taxes, but they all involve some year-end planning and effort to get the paperwork together.
You will need to organize your receipts for donations, moving expenses, child care expenses, political donations, medical expenses, any alimony paid, any eligible employment expenses, any union or professional dues, any carrying charges or interest expenses, public transit passes and receipts, children fitness and arts amounts and the seniors’ B.C. renovation tax credits.
A great way to get a tax deduction and give back to the community is to make a charitable donation before Dec. 31, 2013.
You need to make sure that the organization provides you with a tax deduction receipt that has their charitable donation number on it as registered with the Canada Revenue Agency.
Any donation over $200 gives you a tax credit of 29 per cent federally and 14.7 per cent provincially.
If you do not have enough taxable income to absorb the credit in the current year, you can carry the credit forward for up to five years.
Please note that after March 20, 2013, the deduction for safety deposit boxes will no longer be allowed.
Any senior whose income is above $70,954 will see that their old age security begins to be clawed back.
Income over $34,562 initiates the claw back of the age credit.
The GST credit will begin to be phased out after an annual family income of $34,561 is reached.
The child tax benefits are phased out when the annual family income exceeds $43,561.
The RRSP deadline is March 1, 2014. The person with the higher income can contribute funds to their own RRSP as well as to a spousal RRSP keeping in mind the contribution limits for each person.
The contribution limits can be found in the RRSP section of last year’s Notice of Assessment.
Contributions to an RESP are matched by the Canada Education savings grant to a maximum of $500 per child per year.
There is also the ability to receive the Canada Learning Bond which will provide $525 for the child in the first year and $100 every year after until the child turns 15.
You can establish a RDSP (Registered Savings Disability Plan) for a person who is eligible for the Disability Tax Credit.
Contributions up to a lifetime maximum of 200,000 are non-deductible but eligible for tax deferred grants and bonds.
If your health has deteriorated substantially over the last 12 months, please make sure that you apply for the Disability Tax Credit.
The medical professional will need to fill out form T2201 which will then need to be sent to the Canada Revenue Agency.
It will need to be approved by the Canada Revenue Agency before you can use it on your tax return.
It is a non refundable tax credit of $7,697 (in 2013) that can be used to offset any current taxes payable.
Also, make sure to let your tax preparer know if you have become the family care giver and are taking care of someone in the home who has recently become disabled.
If you have investments that you have sold during the year that will result in a capital gain, please consider selling some investments that will result in a capital loss, to offset the current gain.
Any capital losses can be carried back three years or forward seven, 10 or 20 years depending on when the loss was originally incurred.
Receiving eligible dividends will result in a lower tax than the receipt of non-eligible dividends.
You may also want to consider restructuring your investments so that any interest is deductible rather than non-deductible.
The rates for eligible versus non-eligible dividends received from private corporations are changing in 2014, depending on the taxpayer’s province, so if you receive non-eligible dividends in 2013, you may save up to two percent more tax than if they were paid in 2014.
Voluntary disclosure of income is still available to report income not reported in the past so that the various tax credits can be received.
You need to report the income before you receive any demand to file from the Canada Revenue Agency.
If you have foreign property or are a U.S. resident, you need to disclose your World Wide Assets over $100,000 and your World Wide Income and may have to file a tax return in both countries.
Please note that there is now money changing hands between governments of foreign countries for information on suspected tax evaders.