(June 2009)
Now that you have filed your 2008 tax return, you may be wondering if you took full advantage of all your deductions and credits to minimize your income taxes. Child care receipts are accumulated throughout the year and are often misplaced or forgotten when it’s time to prepare your tax return. Nevertheless, it pays to keep these little slips of paper as they could be worth a significant tax refund.
Tax relief can come in the form of tax deductions or tax credits. Depending on your taxable income, deductions can be worth more than credits, but whether you are talking about a deduction or a credit, they’re both worth money to you.
It is important to note that child care expenses cannot be carried forward to future tax years. They must be deducted in the year that they are incurred. The only way to make a claim after the fact is to apply for a reassessment. It is expected that the lower earning parent must claim child care expenses. If you have children between the ages of seven and sixteen, you may deduct up to $4,000 per year in child care costs. If your children are under seven then you are entitled to deduct up to $7,000 a year. In the event your child is disabled, you are entitled to $10,000 per year of child care expenses.
In addition to direct child care expenses, there are other expenses and credits that can be claimed in order to reduce your taxes. Parents received a tax credit of $2,038 in 2008 for each child under the age of 18. Either parent may utilize this claim, however only one parent may make the claim regardless of the number of children. You may be able to transfer any unused portion to your spouse or common-law partner.
Starting in the year 2007, the Government of Canada now allows a tax credit based on enrollment in an eligible fitness program. The credit is available to all children under the age of 16. The yearly maximum is $500 per child, and the claim can be made by either parent. The cost of public transit passes for children under the age of 19 can also be claimed by the parents. There is also no restriction on who can claim transit passes and the fitness amount for children.
Parents can claim adoption expenses relating to a completed adoption for a child under the age of 18 years. Eligible adoption expenses include fees paid to provincially licensed adoption agencies, legal, administrative and translation fees, reasonable travel and living costs for the child and adoptive parents, and mandatory fees paid to a foreign institution. The maximum claim is $10, 445, and the expenses may be divided between the two adoptive parents as long as the total is not in excess of the maximum.
Raising children can be a huge expense. Some estimates are that it costs about $100,000 to raise a child to age 18. Ensure you take advantage of these tax saving tips to help relieve some of the financial costs. Keep all receipts in a file and then your task of making the most of your tax credits and deductions is much easier.
This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of FundEX Investments with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca.