Top Year End Tax Planning TipsBrian Jang ON January 16, 2018
Tax season is on the horizon, and so as we enter a new year, we are preparing to pay for the old one. Perhaps you managed to find new ways to reduce the amount you will pay, taking advantage of all your options. But maybe you forgot, or simply didn’t know all the ways you could minimize your taxes. In that case, it’s best to be aware of them so that you will be better prepared in the future. Here are some tax planning tips to do to reduce your taxes
1. Charity Donations Give You a Tax Break
Giving to charity is something that is great to do, regardless of the time of year or how much it will help you with your tax planning, but there is an added bonus to helping others—you can benefit from tax deductions.
Not every donation can be claimed. You must ensure that you are dealing with a registered charity, for example. You will also have to be aware of any regulations, such as the need to deduct the market value of any thank you gifts you receive from the charity in question from the amount of your donation.
Get your receipts organized so your giving can give back to you
2. RRSP Contributions
Making a contribution to your Registered Retirement Savings Plan (RRSP) is possibly the best-known and most popular way of reducing the tax you will be expected to pay. To know what your deduction limit is, be sure to check last year’s Notice of Assessment.
If you have participated in the Home Buyer’s Plan or the Lifelong Learning Plan, you will need to keep in mind that your contributions should be high enough to cover the amount of your repayment. If you forget to do so, the repayment amount will be converted into taxable income– something you clearly want to avoid when you’re tax planning.
3. Medical Expenses
Of course, getting your health in order is worth more than just financial savings. However, you are able to deduct medical expenses that you pay for yourself, so long as the amount paid is greater than $2,268 or three percent of your net income. You can combine all of your expenses with those of your spouse or common-law partner, as well as those of any dependent children, claiming the total amount on a single return.
In addition to standard medical expenses, you should make sure not to forget such things as orthopaedic shoes, boots and inserts that are recommended by a doctor, motorized scooter that are used in place of wheelchairs, and costs related to the tutoring of children with learning disabilities.
4. Home Renovations
In addition to the medical expenses listed above, there is a non-refundable tax credit on certain home renovations designed to allow greater accessibility and functionality for those 65 and older, and those with disabilities. The credit covers items such as handlebars for tubs and showers, and ramps for wheelchair access, and is equal to 15% of the expenses, to a maximum of $10,000 per year. Some purchases will qualify for both this and the medical expenses tax, meaning both can be claimed.
Taxes need to be paid, of course, but there is no reason for you to be paying more than you need to. There’s no question—it’s worth remaining aware of all possible deductions and credits to which you are entitled.
Need help with your tax planning? Contact BCJ Group today!
- Registering for the GST Retroactively
- Which Canadian Business Structure is Right for You?
- The Gig Economy in 2020: Tips for Saving Taxes
- How the Government is Helping Seniors During the COVID-19 Pandemic
- The True Costs of Everyday Expenses