Tax Freedom Day

Last Monday; June 9^th was the day when the average Canadian family had made enough money to pay its annual taxes, says the Fraser Institute.

A typical Canadian family who earn $99,841 per year in total household income pays approximately $44,435 in tax, or 44% of their income to the federal, provincial and municipal governments.

The Fraser Institute says this year our tax freedom day fell one day later than last year, this is due to the fact some governments are increasing their taxes.  Back in 1961, taxes were low enough that Canadians earned enough by April to cover their taxes.  The latest tax freedom day on record was June 24, 2000.

Year Round Tax Planning

Tax planning shouldn’t just happen every April; by being forward thinking you can reduce your 2014 tax bill by identifying credits and deductions now.  Here are some tips; 

·        Pay your personal income tax installments on time; with the next installment date fast approaching those self-employed individuals whose estimated income tax for the year exceeds $3000 should be ready to pay their next installment by June 15^th this will avoid late fees and interest charges.

·        Individuals who are turning 71 years of age in 2014 must convert their RRSPs to RRIFs before the end of the calendar year.  If this is you, consider maxing out your final RSP contribution before December 31st. 

·        Seniors and/or retirees should also take note and educate themselves on the important tax changes of recent years; including income splitting opportunities, changes to OAS and CCP, and the benefits of TFSAs.

·        Equivalent-to-Spouse Credit: If you are single, divorced or separated you may be able to claim your son or daughter (under age 18), or another family member who lives with you and who is dependant; as an ‘equivalent-to-spouse’ for tax purposes.

·        Disability Credit:  Those with a severe or prolonged mental or physical disability that significantly impedes their ability to perform the routine tasks of daily life can apply for this credit.

·        Caregiver Tax Credit:  Canadian families that provide in-home care for a dependant adult relative may be eligible for a caregiver tax credit provided the dependant’s net income is below a certain amount.

·        Childcare expenses:  Daycare fees, summer camp or boarding school expenses for children under age 16 can be deductable providing the parents are either working or attending school full time.

·        Medical Expenses:  You can reduce your tax bill by claiming a tax credit for all or part of an expense related to a medical condition.  This includes things like guide dogs for the blind, bathroom aids, attendant care, even a portion of the cost of an air conditioner to help ease a severe respiratory ailment, accessible housing and tutoring services for those with a certified learning disability.

·        Moving Expenses:  The cost of renting a truck, hiring movers, storing furniture, legal fees, real estate commissions, the cost of breaking a lease, and food or hotels can be claimed if your move brings you a minimum of 40km closer to your new job.

A lot of out of pocket expenses can be used to reduce your overall tax bill.   By doing a little research now; you can save yourself a lot of time and stress come next April.  If you have any questions, or need help give me a call.

Have a great weekend,

Tracey

 

Source:  Advisor.ca articles written by staff 09-06-14 and 09-10-13