The Canadian Income Tax Act and related regularities are complex and tax payers should obtain professional advice on any questions they have. The following tips and suggestions do not cover all aspects of taxation and should not replace any professional advice.
Tax Free Savings Account
Commencing in 2013, every individual over the age of 18 may contribute up to $5,500 annually to a special tax free savings account. The income earned in this account will be tax free even upon withdrawal. This amount is an increased from the contribution limit from 2009 to 2012 of $5,000 and is subject by an inflation factor.
RRSP and Other Deductions
- Make your RRSP contribution at the beginning of the calendar year, or at least have your financial institution deduct a monthly amount from your bank account.
- If you make monthly RRSP contributions, consider asking CRA to allow your employer to hold less income tax at source and thus increase your take home pay.
- Commencing in 2007, seniors will be able to transfer up to 50% of their eligible pension income to their lower income spouse. The ability for seniors to income split with their spouse will assist in lower income taxes and may have additional benefits such as reducing the OAS and age amount clawbacks.
- If your employment income is low enough that you do not pay income taxes, (say you are a student) consider filing your income tax anyway. This will increase your RRSP room and you will be able to contribute more RRSP's in the future when income is much higher.
- Deduct membership dues of professional associations.
- Deduct employment expenses such as automobile expenses if your employer requires you to incur those expenses as a condition of your employment. The GST component of these expenses can also be clawed back.
- Commission sales personnel should ensure they deduct all allowable expenses incurred to earn commissions.
Personal Tax Credits
- Claim all allowable medical expenses in the current year. The expenses should be claimed on the spouse with the lower income. Remember that insurance premiums for health, dental and out of province insurance are allowable medical expenses.
- Spouses should combine charitable donations receipts and claim on the return with the higher tax bill.
- Claim the Disability Tax credit if your medical doctors completes Form T2201.
- If you have neglected to claim any personal tax credit, you can request CRA to go back 10 years to amend your return. There is a special protocol to follow.