Five Tips For Filing Your Income Tax

Friday April 25, 2008

CityNews.ca Staff

It's tax season, and the April 30 deadline is fast approaching. Though there are no "last minute deals" for filing late, we've compiled some tips - with the help of KPMG - that could help you maximize your return.
But not everyone likes the cuts. One parent doesn't agree with the child tax benefit.
"A national childcare system...would help me more...than getting $50 or $100 a month," argued mom Jesse White.
Another parent loves it. "Getting exercise and daily activity is absolutely perfect," claimed dad Mike Johnston.
Check out the other tips below.
We also looked at three tax programs that yielded wildly different returns for one city councillor. 

 

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Top Five Tips

1) Are you an employee?

Employment tax credit - If you are employed, remember to claim the employment tax credit on up to $1,000 on your 2007 tax return to help cover your work-related expenses. The credit is worth up to $150 in tax savings.

2) Are you a commuter?

Commuters' tax credit - If you kept your monthly transit passes for travel during 2007 on local or commuter buses, subways and trains, remember to claim the transit pass tax credit on your 2007 personal tax return. You may also be able to claim the credit for monthly passes used by your spouse or child under 19. Staring in 2007, weekly transit passes are also eligible for the credit, provided you purchased at least 4 consecutive passes that grant unlimited transit use for 5 to 7 days. Also, now eligible are electronic payment cards that allow at least 32 one-way trips on public transit during a period of up to 31 days.

3) Are you a business owner?

Self-employment expenses - If you're self-employed, make sure you take advantage of all the business-related expenses that you can claim to help reduce your taxes. These include automobile expenses, parking fees, business association fees, entertainment costs, convention expenses (a maximum of two per year), cell phone bills, depreciation on your computer, and salaries paid to assistants, including family members. Remember that in most cases, you can deduct private health care premiums as a business expense instead of as a medical expense.

4) Are you an investor?

You may be able to claim deductions for:

Interest - If you've borrowed money that you're using to earn income from a business or property, such as common shares bought on the stock market, the interest you pay is generally deductible.

Carrying charges - You may also be able to deduct carrying charges you pay to earn investment income, such as charges for the management and safekeeping of your investments; safety deposit box fees; accounting fees for recording investment income; and fees for investment counselling.

RRSP contributions - If you made an RRSP contribution by February 29, 2008, and you have enough RRSP deduction room, you can claim the deduction on your 2007 income tax return or carry it forward, if doing this will benefit you more.

Capital gains exemption - If you realized capital gains on certain small business shares and farm and fishing property during 2007, you may benefit from the increase to the amount of exemption you can claim, which rose to $750,000 (up from $500,000) as of March 19, 2007. In the 2007 transitional year, the amount of exemption you can claim is essentially up to $500,000 of capital gains from qualifying property sold from January 1, 2007, to March 19, 2007, plus an additional $250,000 of capital gains from qualifying property sold on or after March 19, 2007, and before 2008.

Small business investment losses - If you or your company invested money in an unsuccessful "small business corporation" and you now have a capital loss on shares of the corporation or debt it owes you, the losses may qualify as "allowable business investment losses". Unlike other capital losses, this type of loss can be used to reduce income other than just simply capital gains, such as employment or investment income.

5) Do you have a family?

Child Tax Credit - If you have any children under the age of 18 at the end of 2007, you can claim the new, non-refundable Child Tax Credit based on the amount of $2,000 for each eligible child. In 2007, the credit is worth about $300 per child. For children that live with both parents, either parent may claim the credit. Otherwise, the credit must be claimed by the parent who would be able to claim the wholly dependent person credit for the child, or who could claim the credit if the child was an only child. You can claim the full amount of the credit in the year of a child's birth, death, or adoption. Unused credit amounts can be transferred between spouses.

Child care expenses - If you have qualifying child care expenses, you may be able to deduct $7,000 for each child under seven and $4,000 for each child aged seven to 16. The expenses have to be made to allow you or your spouse to work, carry on business, attend school or carry on grant-funded research. Usually, the lower-income spouse must claim the deduction.

Children's fitness tax credit - If you have a child under the age of 16 enrolled in an eligible fitness program, starting in 2007, you may be able to claim up to $500 of related expenses under a non-refundable children's fitness tax credit. Eligible children's programs involve activities that contribute significantly to your child's strength, endurance, flexibility and balance.

Split pension income with your spouse - If you earn income eligible for the pension income tax credit, starting in 2007, you and your spouse or common-law partner may be able to reduce your overall tax bill through a new pension income splitting measure. To take advantage of this opportunity, you and your spouse should file a joint election on Form T1032 with your returns to allocate up to 50 percent of your eligible pension income to be taxed in the hands of your spouse, where it will be taxed usually at his or her lower marginal rate

Charitable donations - If you're married, don't claim charitable donations separately- combine them and claim them on the higher-income spouse's return. The receipts can be in either spouse's name. If you donated public company shares to a charity in 2007, you will not have to pay tax on any capital gain on the shares.

Pay your spouse's tax bill - If you earn income in a higher tax bracket than your spouse, consider paying your spouse's tax bill with funds from your own separate bank account. This will leave your spouse with more funds of his or her own for investments, on which he or she will pay a lower rate of tax than you would.

Transfer your credits - If claiming certain non-refundable credits has reduced your federal tax owing to zero without using up all the credits, you may be able to transfer the unused amount to your spouse. Credits for charitable donations, tuition fees, education amounts, the age amount (for people over 65), pension income credits, or disability credits can be transferred to your spouse's return, as long as you've used as much of them as you could.