Before You Fill Out Your
Tax Return...
Now
that the RRSP season is behind us, Canadians turn their attention
to income tax time. The deadline for filing your tax return is
April 30th. Depending on your situation, non-refundable tax credits
can help reduce your tax base. Here are a few simple tips you
should keep in mind.
Charitable donations
Those of you who make donations to your favourite charity will
get a tax credit when these are claimed on your tax return. Keep
in mind that the federal credit is 16% on the first $200 and 29%
on amounts above $200. In addition, there are corresponding provincial
credits based on your province's tax rates.
Charitable donation receipts can be transferred to your spouse.
The higher income earner should claim all donations if the province
of residence has a provincial surtax and the higher income earner
is subject to it. This way you will get the maximum credit against
the income in the highest tax bracket. If surtaxes do not apply,
either spouse can claim the donations.
Medical Expenses
Medical expenses are also transferable between spouses. Medical
expenses can include amounts paid outside of Canada and they must
be more than 3% of your net income or $1,813, whichever is less.
Therefore, the spouse with the lowest income should claim all
expenses.
You can claim the expenses of all immediate family members (child,
spouse, parent, grandparent, brother, uncle, niece…) who
depended upon you for support during the tax year. The total of
these expenses must be more than the lesser of $1,813 or 3% of
the dependent's net income for the year up to a maximum of $5,000.
You can claim medical expenses paid in any 12-month period ending
in 2004 that were not claimed in the previous year.
Tuition and Education Amounts
You can claim fees paid for post-secondary courses. Each claim
must be $100 or more for each educational institution and the
institution should provide you with an official tax receipt or
a form T2202A. A portion of the education amounts can also be
transferred from spouses and children. To find out what amount
is eligible, complete the calculation on the back of your T2202A
or schedule 11 in your income tax forms.
Spouse or Common-Law Partner Amount
If your spouse or common-law partner earned less than $7,484
last year, follow the calculation on line 303 of your return to
see what amount you can claim.
If you were single, divorced, separated, or widowed you can claim
the same amount of $7,484 minus the income for any dependent.
This amount is called the "Amount for an eligible dependent"
and is found on schedule 5 of your return.
Age and Pension Credits
These amounts are based on your age and whether you are receiving
a pension and can also be transferred to your spouse.
All of the above mentioned credits and further explanations are
in your General Income Tax and Benefit Guide 2004. Take the time
to read the portions of the guide that apply to your claims. It
may save you money or prevent you from making a costly mistake.
Phil Marcus, CFP
Financial Planner and Branch Manager
SISIP Financial Services, Ottawa, ON
This article is for general information
purposes only and is the opinion of the writer.
