In future posts some of our writers will write about more complex tax tips, but here are a few simple ones to get you started. One of the important things about tax as well is that it very greatly depends on your situation and what can be good for one person might not be good for another. All tax tips are not necessarily applicable to auditors, and by no means are only applicable to auditors.
1. Maximize your RRSP and/or TFSA
Recently there have been a lot of people wondering the RRSP vs. TFSA question. I personally have developed a plan of investing in my TFSA as I think I will have comparable amount of income in my retirement as I have right now. If my salary increases significantly now I will begin to invest in my RRSP and use the tax refund to put in my TFSA. I really like the idea of having a TFSA and saving up all of my retirement funds in there and then retiring tax free. Of course I will not put this ideal over the true economic value of RRSP vs. TFSA today. If you have a lower salary now and will soon have a higher salary (eg. Currently an apprentice/student soon to be a professional), then consider saving you RRSP deductions from now and using them in the future when you will be paying more tax.
2. Claim your applicable work expenses
A lot of jobs require you to travel from your head office to remote locations, park downtown and pay for your own parking, have a home office. Consider your tax deductions for these activities. If you keep a mile log for your car you can deduct the portion of gas/insurance/maintenance that relates to the driving you did for work. For example I do around 30% of my driving for work and therefore claim that as a tax deduction. All parking for your job can also be tax deductible, so hold onto your receipts. If you require a home office for your job consider the tax deductions related to this office, they can range from consumable supplies to a portion of the expense of your home (heat/electricity/etc). The amount you can deduct is determined based on whether you are a salaried or commissioned employee. For more information see http://www.cra-arc.gc.ca/tx/ndvdls/sgmnts/hmwnr/wrk-eng.html. If you take the bus to work, or even if you have a bus pass and don’t go to work, be sure to use the federal transit pass credit.
3. Use tuition credits wisely
Do you go to school and have credits, or do you have a child who goes to school and has credits. Students get a credit in the amount of their tuition paid plus a benefit based on their full time and part time months. This is both a federal and provincial credit and the credits are calculate differently. One thing to consider is how you’re using your credit. Is the student hoarding the credits for the time period 5 years from now when they might be paying tax, or are these credits legally being passed onto a parent or grandparent in the amount of $5000 a year to be used now as a tax credit. When considering tuition credits it often makes sense to consider what’s best for the family as a whole, rather than any one individual.
4. Remember your donation tax credit and pool your credit if you have a spouse
Keep all your tax receipts from donations, they’ll add up (if you’re generous). One thing to keep in mind is that you should assign one spouse as the primary donator for the family. This is because the federal credit is 15% for the first $200 of donations and 29% for all donations above this amount. You’ll want to lump all donations to one spouses name to take advantage of the higher tax break after the $200 mark. Remember donations can be made in the current year and can be carried forward for up to 5 years.
5. Use the fitness tax credit for children
One newer credit that some people may miss is the children’s fitness amount. This credit allows a parent to claim up to $500 per child in a program of physical activity. For more information see http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns360-390/365/menu-eng.html. So next time you’re complaining about how expensive hockey or soccer fees are, be sure to keep the receipts!
[Disclaimer: no tax posts constitute advice, what makes sense for one person might not make sense for another, for advice please contact a local professional accountant]
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