Reduce your tax bill with these end-of-year tips
Around this time of year I create my annual tax folder in Google Drive and begin loading up relevant documents such as my charitable receipts and medical expenses from the year. As new tax forms start rolling in, I keep them all organized in my folder. I also use this process to identify any other opportunities for me to save on my taxes before the end of the year. It’s such an easy process that you can do the same.
Make charitable donations
Not only is this great for the organizations that receive your donations, you also receive a powerful federal tax credit of nearly 30 per cent and some provinces offer additional credit. I really like the CRA’s charitable donation tax credit calculator that allows you to enter your donation data and province so that you can tally up the exact credit you will receive. Donations typically have to be over $25, and the charity must be registered, to receive a tax receipt. The organization’s registration number is printed on the receipt. Not sure where or what to give to? I like to use CanadaHelps.org to see a comprehensive list of registered Canadian charities.
Teachers, buy your teaching supplies
Pay the interest on your student loan
You can claim the interest paid by Dec. 31 on government student loans. This is a non-refundable tax credit, meaning that you won’t get cash back but rather a reduction of your tax bill equal to the amount of interest paid. Sorry, parents, this can’t be claimed by you, only the student.
Make your home accessible
If you qualify, which usually means you or a dependent already receive the Disability Tax Credit, you can claim improvements to your home that make your home more accessible. This is through the Home Accessibility Tax Credit.
If you own a rental property and it needs some repairs, owners can benefit by purchasing supplies and having work performed on their properties prior to the end of the year. For example, I performed a fairly extensive renovation on my rental property last year, which included painting, woodwork and electrical services. I kept my receipts for tax purposes. I know it can be tempting to pay contractors cash in order to save money, but it’s generally better for your taxes not to.
Purchase business supplies
If you run a small business from your home and you need office supplies, equipment and other materials, schedule those purchases before your business’s year-end (for many, this is Dec. 31).
Buy the medical supplies you need
Medical supply costs for items like hearing aids, glasses or contact lenses can exceed what’s covered under one’s benefits plan, especially if you have a family. You may make a claim for a tax credit on the amount of eligible expenses minus whichever is less: $2,268, or 3 per cent of net income (the income you’re left with after deductions such as RRSP contributions).
This last tip won’t save you money, but it will keep you organized. If you haven’t already signed up for CRA My Account, do it. Yes, the CRA has gone digital! It’s the simplest way to keep your tax filing process organized. Plus, you can review your previous filings, check on your RRSP or TFSA contribution room, sign up for direct deposit and more.
Lesley-Anne Scorgie is a personal finance author and founder of MeVest.ca