Maximize Tax Return
The tax season is right around the corner. Typically, I’m the guy who files his return at 11:30pm on April 29th. This year, I want to be more prepared – which is why I’m asking if you have any tips to get the most out of my 2017 tax return?
Ah tax season…that impossible to avoid time of the year that most of us find tedious, complicated and intimidating. Unless of course you are an accountant or work for the CRA – which, based on your question Matthew, I’m guessing you’re not!
The fact is the only things certain in life are death and taxes, and as we get closer to the looming April 30th deadline, many Canadians find themselves scrambling to make the most out of their returns.
While tax planning should be a year-round activity for all households, I do commend you Matthew for wanting to get a head start and not leaving things to the last minute this year.
If you’re like most other Canadians, there is a good chance that you are doing some, or many of the things that can generate a reduction on your 2017 tax bill. And by starting early you can make sure you don’t leave any of these credits or deductions on the table this year.
Start by getting yourself organized, then follow these tips to make the maximum tax return in Canada – and hopefully find a nice refund this year.
Get Organized: Being organized is essential to making tax time less painful and expensive. Start by gathering your return from last year, your T4 and T5 slips and any other income related slips. Also include all your bills and receipts for allowable deductions and claims. Having a file or notebook where you can keep track of your income and expenses will make this job easier.
File on Time: The easiest way to get the most out of your 2017 tax return is to file on time. To avoid paying any penalties, or reducing the amount of your return, be sure to file on or before April 30th – although, I don’t recommend leaving it until the last minute.
Non-Refundable Tax Credits: The federal and provincial governments offer a variety of non-refundable tax credits for Canadians to take advantage of like the enhanced dividend tax credit, Canadian caregiver credit, first time home buyers’ tax credit, volunteer tax credits, political contribution tax credits etc.
Contribute to Your RRSP: One of the quickest ways to reduce your amount of taxable income is to contribute to a Registered Retirement Savings Plan. While it is too late to contribute for 2017, starting today will reduce the amount you pay in taxes and increase your refund next year.
Keep Your Transit Passes: Don’t throw out your used transit passes. If you take the bus or ride the train to work every day, you can claim a 15% tax credit for the money spent on transit. While the government is eliminating the credit amounts for after June 2017, you are still eligible to claim them for the time period of January 1, 2017 to June 30, 2017.
Student Loan Interest: The small silver lining in student loan debt is that you can claim the interest charged on your student loans. You can claim the interest paid on your loan in 2017 or the preceding five years based on a few conditions.
Claim Your Cell Phone: You can deduct a reasonable amount of your cell phone bill if your employer regularly uses it to call you for work. Just make sure you can trace the percentage used back to your air time.
Claim Your Childcare: Childcare expenses are deductible if a single parent or both spouses are working full-time or where one spouse is attending school for all or part of the tax year. You can claim a maximum of $8,000 for each child under the age of seven and $5,000 for each child between the ages of seven and sixteen.
Don’t Lend Your Money to the Government: The tax refund you get year after year is basically YOUR money that the government keeps warm. If you fill out a T1213 Form and hand it over to your employer. They can deduct less of your income. You’ll get more money on your paycheque, but your refund will be significantly smaller come tax season.
If you are one of the many Canadian households carrying record high levels of debt, dedicate your refund to paying down your highest interest bills. Otherwise, invest in the future and start planning for your 2017 return today. You may also wish to enlist the help of a Certified Accountant. Not only is this a wise decision, but working with a CA may open the door to further tax savings.
Jeffrey Schwartz is the Executive Director of Consolidated Credit Counseling Services of Canada and past President of the Credit Association of Greater Toronto (CAGT).
If you have a question about your credit or just about finance in general, Jeff is here to help. Send us an email with your question to [email protected]. You’ll get the expert advice you need and your question may be featured here on our website.