We will continue with our weekly series focusing on Income Tax and make you aware of some commonly missed deductions and tax tips.
As we focused last week on medical expenses, I would like to remind you that healthcare premiums paid through payroll deductions is an allowable medical expense, as well as any out of pocket expenses, not covered by your plan. Also, your deductible on claims if not covered 100% by your plan is also allowed. Your plan may also have annual limits so remember to include any amount you had to pay yourself, once the limits are used up.
Those of you with children needing braces also need to consider the full pay vs monthly pay option. Most benefit plans cover only a small portion of orthodontist bills and often leaves you responsible for paying a vast portion of that braces bill. While the monthly option is attractive to most, remember to consider the tax benefits of paying the entire amount in one year, if you can afford it, as each year you have a medical expense deductible of 3% of your income. If your braces bill was say $5,000, due over 36 months and your income was $50,000 per year, you have a $1,500 medical expense deductible each year and payments of $1,666 – thus you are only able to deduct a small portion, if this was your only medical expense. By paying the total premium up front, the majority of the bill would be deductible.
The disability tax credit is another non-refundable tax credit allowed to those who medically qualify. This needs to be certified by your physician and submitted to CRA to determine if you qualify. We will focus more on this credit next week, but if you are eligible, it can significantly reduce your tax bill.
Another important tip is for younger taxpayers to file a return and report their income. Any child under 18 who works part or full time, may be entitled to a refund of taxes paid if their income is below the basic personal exemption. Even if no taxes are deducted, reporting the income and filing a return will increase the child’s RRSP contribution limit for future years.
The last tip for this week is to make sure you file even if your income is below the personal exemption or if you have no income at all, to ensure you receive the quarterly GST credit and the new climate action incentive (Carbon tax credit) rebate. Other credits that are determined by your taxable income include the child tax benefit and the guaranteed income supplement and these can only be paid if you file a tax return.
As mentioned, next week we will focus on the disability tax credit and the seniors guaranteed income supplement.
If your have any questions, please feel free to call our office at 204 877-3541.
Office Manager, Andrew Agencies, Reston