Tax Savings Strategies in General and Family​

Lifetime Capital Gains Exemption (LCGE)

  • The LCGE is increased for indexation to $813,600 for 2015. Quebec announced an increase in their LCGE to $1 million for qualified farm and fishing property for 2015 and later years.Lifetime Capital Gains Exemption (LCGE)​

Share your incomeShare your income

Many government benefits are income tested so transferring income to a lower-income spouse may help the higher-income spouse reduce taxes and get more. ​​

For instance, if both of you are 60 or older and receiving CPP payments, the higher-income spouse can elect to attribute up to 50% of his or her CPP income to the lower-earning spouse.

Medical expensesMedical expenses

This year, costs for the design of personalized therapy plans for those eligible for the disability tax credit and the cost of service animals used to help those with severe diabetes can now be claimed. ​

Be sure to claim your medical expenses on the tax return of the lower income spouse. ​​

This could save you more tax since your claim is limited to $2,171 (for 2014) or three per cent of net income, whichever is less.

Transit passTransit Pass

If it covers at least 28 consecutive days you can claim 15% of the value—and there’s no limit on how much can be claimed. ​

GST/HST creditGST/HST credit​​​​

If you’re entitled to the GST/HST credit paid based on family net income, it used to be that you had to apply for the credit on your tax return. No longer. ​​

When you file your tax return, Canada Revenue Agency (CRA) will now determine your eligibility and will tell you if you are entitled to the credit.​

​​Legal fees to collect unpaid rentLegal Fees To Collect Unpaid Rent

Generally may be are deductible only if they are  related to collecting the unpaid rent.​

Property transferred from parent to childProperty Transferred  from Parent to Child

The parents can transfer their properties to child at any time at the Fair Market Value.​​

 Income attribution rules will be applied to the minors (who cannot own property anyway)​

Ontario tax creditsOntario Tax Credits

The low income families and the student who are living away from home and are paying rent are eligible to receive up to $1000 upon entering the year’s property tax or the rent being paid in Ontario.​​

Home office expensesHome Office Expenses

Where there is a home used for the business then there may be a home office expense based on the % area used divided by the total area of the home to be applied for the total home expenses (but cannot claim the expenses if the business shows a loss)​

​Claim your Home or Vacation Property as Principal Residence to save Capital GainsClaim your Home or Vacation Property as Principal Residence to save Capital Gains

If the appreciation in value is greater than the home you live in, then you can name the vacation home as the principle residence for purposes of the tax free gain on sale.

(Can only have one principal residence)​

Investment income earned in a corporationInvestment income earned in a corporation

1/3 of the tax  paid is refundable to the corporation upon the payment of taxable dividends.

CRA and income tax auditsCRA and income tax audits

The rental losses for 3 years or more are high audit risk for CRA and the invoices which are not stamped “PAID” , could be rejected as tax deductible receipts. ​​

Cancelled checks are not accepted as receipts.​

Medical expensesMedical expenses

You may be able to claim a non-refundable tax credit based on the cost of medical expenses for any 12 month period.​​

Pool your donationsPool your donations

The amount you donate is eligible for both federal & provincial donation tax credits. Once you have made at least $200 of donations in any year, the donation credit jumps to 29% federally, and between 11% and 21% provincially. ​​

If you are married then you can pool your donations when you file your return.

Claim The Canada Employment ​AmountClaim The Canada Employment ​Amount

The Canada employment amount was introduced in 2006 to give Canadian a break on what it costs to work , including expenses such as home computers etc. ​​

For 2015, the employment amount is  equal or lesser of $????

Write off your kidsWrite off your kids

  • You have a children under 16 in 2015 then parents can claim up to $500/year for eligible fitness expenses paid for each child. ​​

  • Don’t forget to claim the “child amount” of $2089 for each child under the age of 18 in 2015​​

​Foreign Income Verification StatementForeign Income Verification Statement

  • Canada Revenue Agency advises that if you know you won’t be able to get a slip by the due date, simply attach a note  to your return stating the payer’s name & address, the type of income involved. Use pay stubs to estimate the amount to report. ​​

Tax Savings StrategiesFile On Time Before Midnight April 30​

If you file your return late, there is an automatic 5% penalty on the amount of tax unpaid plus an additional 1% /month penalty on the amount due each month the return is late, up to a maximum of 12%.Late filters are also subject to non deductible arrears interest.​

Tax Savings StrategiesAvoid that refund

Under the Tax Act , it is possible to get your tax refund throughout the year, on every pay check, instead of waiting until your return is filed. Apply using CRA Form T1213,”Request to Reduce Tax Deductions at Source.”​

Tax Savings StrategiesChildren’s Fitness Tax Credit​

Government of Canada allows a non-refundable tax credit based on eligible fitness expenses paid by parents to register a child in a prescribed program of physical activity.

Tax Savings StrategiesDividends from Canadian Corporation​

Don’t miss out on the following tax saving ideas: ​​

  • Income splitting with your partner and children.​
  • Investing the child tax benefit payments in your children’s names.
  • Issuing shares to your partner or children in a family owned business. ​

Dividends from Canadian Corporation

  • Investing the child tax benefit payments in your children’s names. ​

  • Deducting interest expense on money borrowed to purchase investments or invest in a family business.​

  • Deducting the interest paid to purchase Canada Savings Bonds on the payroll plan at work. ​

  • Deducting your safe deposit box fees. ​

  • Deducting accounting fees paid to calculate the investment income reported on your tax return. ​

  • Deducting the interest paid on your margin account. ​

  • Review in detail the charges on your brokerage accounts for any possible interest or other fees paid that may be deductible. Look for accrued interest charges on bonds and similar investments purchased. ​

Tax Savings StrategiesInvest Inheritance In Separate Names​

A spouse with a lower income who receives an inheritance should be investing it in a separate account, so any investment return is taxed solely in the lower income spouse’s hands. ​​

Investing it in joint accounts would result in higher taxing.

Tax Savings StrategiesSplitting Income

Starting this year you’ll have the ability to claim the “Family Tax Cut” credit.​​

This credit will allow you to save up to $2,000 in taxes by effectively shifting part of the tax burden from a higher-income spouse or common-law partner to the one with a lower income. ​​

You’ll have to meet the criteria, and complete Schedule 1A, which has all the details.​

Adoption expensesAdoption expenses

  • If you’re adopting, or have adopted, a child who is under 18 years of age, you may be able to claim up to $15,000 of adoption expenses (up from $11,774 previously). ​​​​
  • The expenses should be claimed in the year the adoption process ends. ​​
  • You can split the $15,000 limit between you and your spouse or common-law partner, which can make sense if you’re both in high tax brackets.​

Tax Savings StrategiesChildren’s fitness amount

If you’ve paid fees for your child to participate in a prescribed program of physical activity, you can now claim up to $1,000 of those fees (up from $500 last year), which will provide tax savings in the form of a non-refundable credit.​​​

Tax Savings StrategiesAutomobile Expenses

The rules surrounding motor vehicle expenditures in relation to rental property operations can be confusing, particularly when an investor owns only one rental property. You can only deduct “reasonable” motor vehicle expenses if you meet all of the following conditions;​​

  • you receive income from only one rental property that is in the general area where you live;​​
  • you personally do part, or all, of the necessary repairs and maintenance on the property; and​​
  • you have motor vehicle expenses to transport tools and materials to the rental property​

The Canada Revenue Agency (CRA) voluntary disclosures programThe Canada Revenue Agency (CRA) voluntary disclosures program ​

Allows taxpayers to ‘fess up about something on their current or past tax returns that may not pass the smell test. Doing this can prevent additional penalties from being assessed. But for the disclosure to be accepted, you must contact the Canada Revenue Agency (CRA) before it contacts you.​​

Tax Savings StrategiesDon’t have to pay for tax software to use the NETFILE service ​

The Canada Revenue Agency lists several online programs that are 100% free and certified to work properly with its systems (see cra-arc.gc.ca).

Tax Savings StrategiesTax efficiency

Should never be the main reason for buying an investment or real estate. Start with the right asset mix for your risk tolerance and investing goals, then look for tax efficiency.​

Loan and mortgage lossesLoan and Mortgage losses

If you invest money in loans and mortgages for a living, you may be able to write off your losses as a business expense.​​

Tax Savings StrategiesInvest in your kid’s names

  • Let’s say you give your 5-year-old $100,000 and she uses it to buy shares of a bank stock in her name. By the time she’s 18, those shares could be worth $200,000. She could then cash in $20,000 worth of stock a year, and pay the capital gains taxes on that growth at her own much lower rate.​​

  • Treasure hunt equipment: Claim your metal detector—searching for buried treasure is a business venture.​​

  • Baby sitting: Write off your child-care expenses for a night out if you’re at work, school or entertaining clients.​​

  • Self-employed : Save BIG when you sell :The government likes to encourage small business, so they’re willing to give you a one-time $800,000 capital gains exemption when you sell.​

Tax Savings StrategiesNEVER do this!

Many self-employed people pay their kids or spouse to do some work for the family business as a way of splitting income and reducing the family’s overall tax bill. But don’t get greedy and pay your 16-year-old $50,000 a year. You’re just asking for an audit.​

Tax Savings StrategiesSupercharge your charitable giving

If you’re one of those commendable people who plans on leaving the bulk of your estate to charity when you pass on, we have good news. You can reduce your tax bill substantially—and leave more to your charities of choice—by donating stock rather than cash while you’re still alive. That’s because when you donate stock, you’ll still get the same tax credit you’d get if you donated cash, but you don’t have to pay any capital gains​.

Tax Savings StrategiesSpread your wealth around before you die

  •  A simple tactic for avoiding probate fees on your estate is to slowly move money into TFSAs or regular taxable accounts to avoid a massive tax hit on your final return. You can also set up trusts for your children and grandchildren to average in taxable income at potentially lower marginal tax rates. That, or name your heirs as beneficiaries on accounts or give money to them while you’re alive to avoid probate fees.​​

  •  If neither you nor your spouse has donated to charity since 2007, you can claim the first-time donor super-credit, and get an extra 25%. It’s available only until 2017, the donation must be in cash and only the first $1,000 qualifies.​

Tax Savings StrategiesGolf Club Fees and Membership Dues​

There is NO Income Tax Deduction.​

Tax Savings StrategiesVolunteer tax savings​

If you’re an emergency services volunteer you might qualify to claim a $3,000 amount on lines 362 (volunteer firefighters) or 395 (search and rescue volunteers, which is new for 2014). Alternatively, you can claim an exemption for up to $1,000 of income paid to you as an emergency services volunteer. But you can’t claim both the $3,000 amount and the $1,000 exemption. You’ll likely be better off claiming the $3,000 amount; a tax pro or tax software can help you make that decision.​

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