The new year is almost upon us, and last-minute shopping, holiday parties and work deadlines are cramming everyone’s schedule. But taking some time to plan ahead before Jan. 1 could help you trim the tax bill that awaits you come April.
Here are five things that might help you save tax dollars in 2018.
Make charitable donations
If you’re planning on donating to charity make sure to do so by Dec. 31. Federal and provincial tax credits for gifts and donations can result in savings of up to 50 per cent of the value of the charitable contribution, according to Jamie Golombek, managing director of tax and estate planning with CIBC’s wealth strategies group.
And 2017 is the last year when you’ll have to claim the so-called first-time donor’s super credit (FDSC), which is available if neither you nor your spouse or common-law partner has claimed the donations tax credit from 2008 to 2016. The FDSC grants an additional 25 per cent tax break on cash gifts of up to $1,000.
“Keep in mind that many charities offer online, internet donations where an electronic tax receipt is generated and emailed to you instantly,” writes Golombek.
Go to the doctor
If you’re due for an eye exam or have been putting off a visit to the dentist, you might want to stop procrastinating.
You can claim medical expenses on your tax return, if you paid for them yourself, as long as the amount is more than the lesser of either $2,268 or three per cent of your net income. You can combine your expenses with those of your spouse or common-law partner and dependent children and claim them on a single return.
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If you’re close but under the minimum threshold, you might want to prepay in 2017 for expenses you would otherwise incur in 2018.
“For example, if you expect to pay monthly instalments for your child’s braces in 2018, consider paying the full amount up front in 2017 if it will raise total medical expenses over the threshold,” writes Golombek.
You’ll need receipts to be able to include those expenses on your return. Rather than combing through dozens of pieces of paper, you can ask pharmacies and healthcare providers for a printout that details your total annual expenses, according to financial adviser Marie Engen.
Here’s a list of common medical expenses you might be able to claim.
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Pay the interest on your student loans
You can claim the interest paid by Dec. 31 on government student loans on your 2017 tax return. This is a non-refundable tax credit, meaning that you won’t get cash back but a dollar-for-dollar reduction of your tax bill equal to the amount of interest paid.
While only the student can claim this credit, a relative, such as a parent, can pay on her or his behalf.
Home accessibility renovations
Since 2016, Canadians aged 65 and over and those with disabilities can claim a non-refundable tax credit on certain renovation expenses that make their home more accessible and functional. Think of things like a wheelchair ramp or grab bar in the shower.
The tax credit is equal to 15 per cent of expenses up to $10,000 per year, but in order to claim those costs on your 2017 return, you’ll have to pay by Dec. 31.
Some of these purchases qualify for both this and the medical expense tax credit, and both can be claimed, according to Golombek.
Individuals with changes to tax rates
In many instances, the year-end tax advice involves spending now in order to claim tax credits and deductions in the next year. But when it comes to your income, whether you should act now or wait until Jan. 1 depends on your specific situation.
In general, if you expect your income taxes to be substantially higher in 2018, it may make sense realize any additional income before Dec. 31 in order to take advantage of the lower tax rate in 2017. For example, you may want to take a bonus before the end of the year rather than in January, notes Golombek. British Columbia, for example, is adding a top personal marginal tax rate of 16.8 per cent of taxable income that exceeds $150,000.
The opposite principle applies if you anticipate your income taxes to be lower next year. In Saskatchewan, for instance, all marginal tax rates will decrease by 0.25 per cent for 2018.