Making tax time rewarding by finding ways to put extra cash in your pocket
CIBC offers expert tips and strategies to help Canadians keep more of their money
TORONTO, April 17, 2013 /CNW/ - CIBC (TSX: CM) (NYSE: CM) - Preparing your annual tax return can actually be a rewarding experience if you know how to take advantage of all the tax deductions and credits, says CIBC's tax and estate planning expert, Jamie Golombek.
"If you know where to look, preparing your taxes can be enjoyable as you find savings and ways to reduce your taxes," says Mr. Golombek. "In addition, some of the highest tax-driven benefits may be found beyond the pages of your return. It pays - literally - to know how these deductions and credits can help you keep more of your money."
Mr. Golombek's latest report, Many Happy Returns! Mining Your Tax Return for Extra Money this Spring, provides a number of tips on where Canadians should dig to unearth all of the tax savings available. He notes that it's important you know where to find these savings because the Canada Revenue Agency (CRA) won't always tell you what you missed.
"If you make a mistake and fail to report some of your income, chances are you'll receive a letter from the CRA pointing out the error of your ways. On the other hand, if you fail to claim valuable deductions or credits, don't stand by your mailbox waiting for notification from the CRA. There's no automatic warning system in place to let you know that you could be getting more value from your tax return."
Mr. Golombek highlights a number of tax deductions and credits Canadians should be aware of when filling out their tax returns.
One of the most commonly-known ways to save tax is to make a contribution to a Registered Retirement Savings Plan (RRSP). You can claim a deduction for contributions made up to 60 days after year end that do not exceed 18 per cent of your previous year's earned income with a maximum deduction of $22,970 for 2012.
Public Transit Amount
You can claim a tax credit for the cost of public transit passes that entitle you to unlimited travel for an uninterrupted period of at least 5 days and at least 20 days in any 28-day period.
Children's Fitness and Arts Amounts
You can claim a tax credit for up to $500 of fees you pay for your children to participate in programs requiring significant physical activity, such as sports and athletic programs and another credit for up to $500 in fees paid for arts programs, such as piano lessons and tutoring.
Family Caregiver Amount - New for 2012
You can claim a federal family caregiver amount of $2,000 for each of your qualifying dependants who has an impairment in physical or mental functions. This is in addition to the caregiver amount that is available at the federal and provincial levels.
Charitable Donations and Gifts
A tax credit is provided for donations and gifts to qualified charitable organizations, including registered charities, and public or private foundations.
Dividend Tax Credit for Eligible Dividends
Federal and provincial tax credits are available to reduce the amount of tax payable on Canadian dividends.
Amount for Children Born in 1995 or Later
You can claim an amount of $2,191 for each of your children who was under age 18 at the end of the year. For 2012, the amount can be claimed for children who were born in 1995 or later.
Allowable Medical Expenses
You can claim a credit for total medical expenses that exceed the lesser of 3 per cent of your net income or $2,109 in 2012. One commonly-overlooked expense is out-of-pocket costs for medical and dental insurance plans.
You can claim the disability amount if a medical professional certifies on Form T2201 - Disability Tax Credit Certificate that you had a severe and prolonged impairment in physical or mental functions.
Tuition, Education and Textbook Amounts
Students enrolled in post-secondary education can claim federal and provincial tax credits based on the amount of tuition that is paid, as well as education and textbook amounts.
Non-Taxable Portion of Capital Gains
Unlike interest income that is fully taxable, only 50 per cent of capital gains (less capital losses) are included when calculating total income. The remaining 50 per cent is excluded from income and tax is saved at your marginal rate on this excluded half of net capital gains.
Registered Education Savings Plan (RESP)
RESPs allow for tax-efficient savings for children's post-secondary education. Up to $50,000 can be contributed for each child who is a beneficiary of an RESP and contributions can attract valuable government grants and bonds.
Pension Income Splitting
Spouses and common-law partners can jointly elect to split pension income. This pension income splitting technique has value when the pension recipient has a higher marginal tax rate than the spouse.
Registered Disability Savings Plan (RDSP)
RDSPs are tax-deferred savings plans that can benefit Canadians who are eligible for the Disability Tax Credit. Up to $200,000 can be contributed to the plan until the beneficiary turns 59, with no annual contribution limits. Valuable government grants and bonds are available that can be worth up to 300 per cent of contributions.
Mr. Golombek advises that you need not fret too much if you didn't know about these savings or forgot to make claims in previous years. He advises that you can still claim then by filing Form T1-ADJ - T1 Adjustment Request for any of the ten previous tax years.
"On this form you report the amount of the deduction or credit that you originally claimed (zero if no claim was made), along with the revised amount that you are claiming. CRA will process your request and, assuming the deduction or credit is allowed, will issue you a refund for the tax overpaid."
For more information or to view Mr. Golombek's tax planning reports, please visit www.cibc.com.
CIBC is a leading North American financial institution with nearly 11 million personal banking and business clients. CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, and has offices in the United States and around the world. You can find other news releases and information about CIBC in our Press Centre on our corporate website at www.cibc.com.
SOURCE: CIBCFor further information:
Kevin Dove, Head of External Communications at 416-980-8835, email@example.com