5 simple tax tips to save you money
With about one month remaining until the tax deadline, I thought it might help to review some of the simple ways that you can maximize your tax return. By planning how to optimize your taxes, you can put more of your money back in your pocket.
While most Canadians know they can receive a tax credit on charitable donations, they may not realize that they can get a larger credit by saving their donation receipts for five years and then claiming them in the 6th year.
To maximize the tax benefits of your contributions to federal political parties, the process is almost an exact opposite to the charitable donations. With political contributions, your best tax advantage is on the first $400, which provides a 75% credit. Not surprising considering politicians make the rules, even contributing up to the $1,275 maximum gets you a net credit of 51%, much more than if you made a donation to a charitable organization.
You can claim medical expenses for your entire family in any 12 month period ending in the tax year you are preparing a return for. This allows you to fit as many expenses into the time frame you choose to best maximize your return. The reason you benefit from picking the best 12 month period is that you cannot claim the first dollars spent equal to 3% or your income or $2,011, whichever is less.
Though it may not apply to as many people as the previous tips, you can open up many tax savings opportunities by starting a home business. This could be as simple as buying at garage sales and selling for a profit on eBay. When you have a home business, you can claim any expense incurred to earn income on the T2125 form, which includes sections for CCA calculations and arriving at your net income (or loss). Some examples could be a portion of your mortgage interest or automobile costs, your telephone or internet bills, or even travel for work opportunities or conventions.
All these tax-saving strategies can lead to a big refund come tax time. However, you need to keep in mind that a large tax refund means you gave the government an interest-free loan throughout the year. Using a TD1 or T1213 form, you can adjust the taxes you pay from each paycheque. This allows you to have more money every payday, which could then be used to increase your RRSP contribution, leading to even more tax savings.