– Sponsored –
by Michael Elshof, CPA, CA
Tax season can be a stressful time of year for you and your family. You need to make sure that you have provided your accountant with all of your income and all of your receipts that may reduce the amount you owe to the Canada Revenue Agency or can increase your refund.
Things to keep in mind
Medical expense tax credit
- Most expenses incurred for medical reasons, net of reimbursements from your insurance plan, if you have one, are eligible;
- Total eligible expenses needs to exceed 3% of the lower income spouse’s net income to get any benefit from this;
- Many people don’t realize that travel to and from appointments with specialists also qualifies as long as the one-way trip exceeds 40 kms and the specialist is not available in your area;
- Nursing home and attendant care costs may be eligible;
- Other commonly missed medical expenses include glasses, chiropractor, dental, massage and physiotherapy;
- Your pharmacy can usually print out a summary of your prescriptions for the year, which your accountant would appreciate receiving.
For eligible donations in Ontario, most individuals can get a credit towards their tax balance of 20.5% of their donated amount on their first $200 of donations. Beyond the $200 of donations, most individuals can get a credit of 40.16% of their donations. So make sure to find those donation receipts! On top of this credit, if you and your spouse have not claimed a donation in the prior 5 tax years, you may be eligible for additional credit of 25% on your total donation as part of the First-time Donor’s Super Tax Credit (FDSC). So, for example, if you are eligible for the FDSC and made $500 of donations in 2016 you could receive an additional refund (or reduction of taxes owing) of $286.
Family Tax Cut – the family income-splitting tax credit has been eliminated for 2016.
Child-care expenses – a family can claim up to $8,000 per child ages six and under and $5,000 per child between ages seven and sixteen. This deduction is applied against the lower-income spouse’s income.
Child fitness tax credit – has been reduced to $500 per child from $1,000 and will be eliminated for 2017.
Children’s art amount – has been reduced to $250 per child and will be eliminated for 2017.
Tuition, education and textbook amounts – you can still claim all three of these credits for 2016. For 2017 and beyond, the education and textbooks amounts will be eliminated, but the tuition tax credit will continue to be eligible to claim.
Teacher and Childhood Educator School Supply Tax Credit – those eligible individuals may claim up to $1,000 of purchases. These purchases must be directly consumed or used in performance of the individual’s duties of employment.
Commonly Missed Items:
Disability Tax Credit
Many people don’t know that the disability tax credit exists. For 2016 this tax credit is $8,001 for an adult with an additional supplement of up to $4,667 for those under 18. To qualify for the disability tax credit a person must have a severe and prolonged mental or physical impairment which restricts the ability to perform at least one basic activity of daily living such as speaking, hearing, walking, eliminating, feeding, dressing or performing the mental functions necessary for everyday life. If you have just applied for this tax credit but would have been eligible prior to this year, this credit can be carried back up to 10 years.
Foreign Income Verification
Though most Canadians should now be aware of their requirement to report all specified foreign property with cost of more than $100,000 CDN, there are still some people who have not been reporting this. Penalties for not reporting can be $2,500 per year not filed. If you have not been reporting but should have been, relief may be available through the Voluntary Disclosure.
Every tax season we have several clients who come in to pick up their tax returns and are surprised by the amount of taxes they owe, as for them, it is out of the norm. Though there are many reasons that this could happen, there is one reason that occurs most often; the individual had more than one T4. They were either working two or more jobs or they switched jobs during the year. In simple terms, the way the payroll system works is that income tax to be withheld from your pay cheque is calculated assuming that this is your only employer and the amount you are paid on this pay cheque is the amount you will be paid on every other pay cheque for the remainder of the year. It does not account for other sources of income, and therefore does not account for the potential that the individual is actually in a higher tax bracket. So it is important to keep in mind that if this situation ever applies to you, you should expect that you could possibly pay more taxes at the end of the year. You can always ask your employer to withhold more taxes by asking to fill out a form TD1.
Please keep in mind that this article does not cover all areas of the Income Tax Act and therefore exceptions to these rules may apply.
Collins Barrow is a full-service Chartered Public Accountant firm. We prepare:
- personal tax returns;
- corporate tax returns;
- trust returns;
- Notice to Reader Financial Statements;
- Review Engagement Financial Statements;
- Audited Financial Statements;
- Bookkeeping services, including payroll;
- Farm and Business Succession Planning;
- Corporate Restructuring;
- Other special tax work.
Please contact us for pricing. 613-543-3715
Michael Elshof, CPA, CA
Michael Barclay, CPA, CA, CFP
79 Main St. PO Box 815, Morrisburg, ON K0C 1X0
475 Main St. PO Box 390, Winchester, ON K0C 2K0