Get more out of your personal tax return this filing season
TORONTO, April 22, 2013 /CNW/ - With the 2012 personal income tax return filing deadline fast approaching, here are some practical suggestions from Ernst & Young's latest Tax Matters@EY. Some will save you time and — best of all — some may even save you money.
- Use software. Software can help make your return preparation quicker and easier. Programs can also allow you to optimize credit or deduction claims between spouses or common-law partners, and include helpful tax-filing hints based on the information you input.
- Claim all your credits. Remember to take advantage of family-related tax credits, including the child tax credit, the children's fitness credit and children's arts credit, public transit credit, adoption expense credit, tuition, education and textbook credits, credit for the costs of exams for accreditation as a professional or tradesperson and, new for 2012, the family caregiver amount.
- Defer deductions. If you are unable to use all applicable non-refundable tax credits in 2012 (and they cannot be transferred or carried forward), or if you expect to earn higher-rate income in the future, consider deferring the deduction of certain discretionary amounts, such as RRSP contributions and capital cost allowance, to increase the tax benefit of these deductions.
- Keep charitable donations in mind. The federal tax credit for donations is available in a low-rate credit on the first $200 of donations and a high-rate credit on the remainder. To benefit from the high-rate credit and save a small amount of tax, only one spouse or partner should claim all of the family donations. If your family's annual donation amount is not high, consider accumulating donations over a few years and claiming them all in one year to increase your benefit from the high-rate credit.
- Remember deductions for business owners. Ensure that you take advantage of all available business-related deductions, including automobile expenses, parking, business association fees, home-office expenses (if you qualify), entertainment, convention expenses, cell phone, depreciation on your computer and salaries paid to assistants, including family members, if you are a business owner.
- Don't forget your old address. If you moved in 2012 to start a new job or a new business you may be able to claim moving expenses. In addition to the actual cost of moving your furniture, appliances, dishes, clothes and so on, you can claim travel costs, including meals and lodging while en route (provided the expenses were not reimbursed by your employer).
- Consider capital losses. Net capital losses for 2012 may be carried back three years and applied to net capital gains in 2009, 2010 and 2011. Losses that cannot be carried back may be carried forward indefinitely. Where capital losses are incurred on certain shares or debt of a small business corporation, they may qualify as business investment losses that may be claimed against any income in the year, not just capital gains.
- Deduct interest expenses. If you have borrowed money for the purpose of making an income-earning investment, the interest expense incurred should be deductible.
- Carryforward amounts can get you cash. Review your prior-year return and notice of assessment to determine if you have any carryforward balances that may be used as deductions or credits for your 2012 return.
- Update your instalment calculation to manage your cash flow. If you earn income that is not subject to withholding, you may be required to pay your 2013 income tax liability throughout the year in quarterly instalments. The CRA sends instalment notices based on tax payable in previous years, but if you expect your 2013 income to be lower than in previous years you may be able to reduce your instalments by choosing a different basis for calculation.
For more information on TaxMatters@EY and more personal tax tips, click here.
For many more helpful tax-saving ideas and handy tips throughout the year, see our annual guide Managing Your Personal Taxes: a Canadian Perspective.
And follow us on Twitter @EYCanada.
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SOURCE: Ernst & Young
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