5 things you can do now to save big bucks at tax time
“There’s really not a lot of things you can do to save tax in March and April,” said Jamie Golombek, managing director of tax and estate planning with CIBC’s wealth strategies group.
“There are things that Canadians can do right now to save some tax on their 2016 return, that would not be available to them if they wait.”
A recent CIBC poll found that 77 per cent of Canadians don’t think about their taxes until the New Year, and 66 per cent of Canadians don’t know what they can do to reduce their tax bill.
There are many ways to reduce your taxes (or hopefully get a bigger return), but it often means planning ahead. A tax expert can help outline provincial and federal tax credits available to you and your family, but here are some tips to keep in mind heading toward Dec. 31.
Children’s Fitness and Arts Tax Credits
This is the last year that families can claim up to $250 spent on art classes or cultural activities, and up to $500 on children’s physical activity programs. The Liberals phased out these tax credits to make way for the Canada Child Benefit. The credits have been cut in half for 2016, and will be gone entirely in 2017.
Take advantage of these credits by pre-paying now for classes or courses for 2017.
“If you pay them now, then you’d be able to claim that fitness credit if you haven’t used it up yet for 2016,” Golombek said.
Home Accessibility Tax Credit
The Home Accessibility Tax Credit is new this year. Seniors or those with disabilities can claim expenses for alterations to their home to make them more accessible. This can be used for a whole host of purchases, from a new wheelchair ramp to grab bars in the shower.
“It’s $10,000 a year, 15 per cent of that is a credit,” said Golombek.
“So if you spend that money now, you get the credit right away instead of having to wait another year.”
Teacher and Early Childhood Educator School Supply Tax Credit
Another new tax credit this year, the Teacher and Early Childhood Educator School Supply Tax Credit allows educators to claim up to $1,000 of eligible teaching supplies purchases, and see a 15 per cent return.
This credit covers things such as construction paper and art supplies, as well as educational support software.
WATCH: Tax tips: new credits and enhanced benefits changes
Medical Expense Tax Credit
With medical expenses, you need to claim more than $2,208 or three per cent of your net income (whichever is less) for it to have an impact on your taxes. Partners can combine medical expenses, to be claimed on one person’s return.
“Sometimes it may make sense to pool all your medical receipts — you can use any 12 month-period ending in the year — so you can be strategic about that,” said Golombek.
An example of this would be paying for your child’s braces in a lump sum now, instead of monthly payments over the next year.
You can see a full list of eligible expenses here.
Donations and gifts
If you’re heading to an event next year that provides charitable receipts, see if you can pay before the end of the year.
“If you can make that gift now … you can claim their donation credit this year instead of waiting more than a year to get the benefit of that back,” Golombek said.
Canadians get 15 per cent back on the first $200 of charitable donations, and a 29 per cent return on anything beyond that amount.
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