The April 30th tax-filing deadline has passed and you may think that you can forget about taxes until next April, but there is a better strategy that you can employ. By the time April 30th hits, we’re already 1/3 of the way through the next tax year and you want to be proactive in keeping your tax bill as low as possible. Here are some items to think about, if they apply to you, and can start keeping receipts and records to support what you claim on your 2012 T1 tax return.
The Public Transit Tax Credit
Parents can get a tax credit equal to 15% of the cost of public transit passes used by them, his or her spouse, and/or their children under the age of 19. Canada Revenue Agency has placed a lot of requirements on this credit – read up on their site to see the details.
The Children’s Fitness Tax Credit
Parents can deduct 15% of the cost of fitness programs — to a maximum of $500 per child — from their taxes. If you reach the $500 maximum, it could means savings of $75 per child. The minor must have been younger than 16 at the beginning of 2012, or younger than 18 if they qualify for the disability tax credit.
Here’s what the Canada Revenue Agency (CRA) says qualifies:
To qualify for this amount, a program must:
• be ongoing (a minimum of eight consecutive weeks duration or, in the case of children’s camps, five consecutive days);
• be supervised;
• be suitable for children; and
• require significant physical activity that contributes to cardiorespiratory endurance, plus one or more of:
o muscular strength,
o muscular endurance,
o flexibility, and/or
Physical activity includes strenuous games like hockey or soccer, activities such as golf lessons, horse-back riding, sailing and bowling as well as others that require a similar level of physical activity.
For more information on the activities that contribute to cardio-respiratory endurance, visit the Public Health Agency of Canada’s Physical Activity Guides for children and youth.
The Children’s Arts Tax Credit
This credit is structured much like the Children’s Fitness Tax Credit. It was introduced in 2011 and allows parents to deduct 15% of the cost of arts programs — again, to a maximum of $500 per child — from their tax bill. This could also add up to savings of $75 per child. The minor must have been younger than 16 at the beginning of 2012, or younger than 18 if they qualify for the disability tax credit. What programs qualify for the credit? Here’s what the Canada Revenue Agency (CRA) says:
To qualify for this amount, a program must:
• be ongoing (either a minimum of eight consecutive weeks long or, in the case of children’s camps, five consecutive days long);
• be supervised; and
• be suitable for children.
The program also has to meet one of the following criteria:
• it contributes to the development of creative skills or expertise in an artistic or cultural activity;
• it provides a substantial focus on wilderness and the natural environment;
• it helps children develop and use particular intellectual skills;
• it includes structured interaction among children where supervisors teach or help children develop interpersonal skills; or
• it provides enrichment or tutoring in academic subjects.
This credit is in addition to the federal children’s fitness credit, but the same program expenses cannot be used to claim both this credit and the fitness credit.
Child Care Expense Deduction
While tax credits are great, as you can see from above, they are calculated using the lowest tax rate. The higher the tax bracket you are in, the less of a benefit there is to you.?? Child care expenses are deducted dollar for dollar against the employment income earned. This deduction must be taken by the spouse with the lower income — even if that means zero income — and cannot be greater than 2/3 of that spouse’s earned income. There are other limits, which you can read about on Canada Revenue Agency’s site. Here are the types of childcare expenses that CRA says are eligible to claim:
You can claim payments for child care expenses made to:
• caregivers providing child care services;
• day nursery schools and daycare centres;
• educational institutions, for the part of the fees that relate to child care services;
• day camps and day sports schools where the primary goal of the camp is to care for children (an institution offering a sports study program is not a sports school); or
• boarding schools, overnight sports schools, or camps where lodging is involved (read the note in Part A of Form T778, Child Care Expenses Deduction).
If the services were provided by an individual, you will need the individual’s social insurance number.
Home Office Expenses
If you’re self-employed, or are looking to be self-employed, then you probably know that you will need to report your income and expenses. This is done on the form T2125. What you may not be aware of is that you can claim a portion of the expenses relating to your home (mortgage interest, property taxes, utilities, maintenance, insurance). If you have a separate home office, or use an area of your home to work in, then that percentage of the square footage used is multiplied by those costs and are deducted from your income earned. As those annual costs can be quite high, they can have a large impact on reducing your taxes. Just make sure you use a reasonable percentage – 10% is often used – or CRA may deny your claim.
These are a few of the most-used credits and deductions, and I hope they’ve inspired you to start keeping track of them. Don’t forget to keep all of your receipts!
Dykstra is the wife of one and the Mom of three. She is a Chartered
Accountant who uses the right side of her brain as a writer and
photographer. You can find her at her personal site Dutch Blitz.