Tax planning is probably the farthest thing from your mind at this time of the year. However, the year 2013 is drawing to a close. That means you are running out of time to take advantage of any last minute tax reduction strategies. Here are a few ideas, reminders and last minute tips that can save you some tax dollars and put a few extra bucks in your pocket.
Tax Credits – Most tax credits are based on the calendar year. Make sure you have all receipts for children’s fitness and arts programs. Public transit receipts are also good tax savers. Students get a tax credit for interest paid on qualified student loans. The interest claimed by the student can be for the current year as well as the preceding five years as long as the interest was not claimed in a prior year. If you purchased a qualifying home in 2013 and you are considered a first time home buyer, you are eligible for a $5,000 Home Buyers Credit. The charitable donations tax credit is available in two stages. The lower rate applies to donations up to $200. The higher rate applies to donations above $200. To take advantage of the higher credit, only one spouse should claim all charitable receipts. Medical expenses are limited by an income threshold. The spouse with the lower income should claim all family medical expenses.
Tax Deductions – Unlike tax credits, which generally reduce your taxes at the lowest tax rate regardless of your income, deductions will reduce your taxable income and thereby give you a higher tax break when your income puts you in a higher tax bracket. One of the most popular tax deductions is the Registered Retirement Savings Plan, or RRSP. Every dollar deposited up to your RRSP limit is deducted from your taxable income. You have until 60 days after the end of the year to make RRSP contributions and apply those contributions to your 2013 taxes. For those collecting a pension, you can deduct and split up to 50% of your pension income with your spouse. Moving expenses are tax deductible if you moved at least 40 kilometers to be closer to work, open a new business or to attend full time studies in a post-secondary education program. Unused moving expenses can be carried forward to the next year. Interest expenses on money borrowed to earn investment income is tax deductible.
These are only a few ideas that merely scratch the surface of potential tax saving strategies you can implement to save tax on your income tax return. It is recommended that tax planning be done early and on a year-round basis. If you feel too rushed or hurried to make any final year-end tax decisions for 2013, you can make it your New Year’s Resolution for 2014. Start planning early and watch your tax savings accumulate throughout the year. Have a wonderful holiday season and we look forward to talking to you in 2014.
The foregoing is for general information purposes and is the opinion of the writer. This information is not intended to provide personal advice including, without limitation, investment, financial, legal, accounting or tax advice. Please call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., to discuss your particular circumstances or suggest a topic for future articles at 613-798-2421 or E-mail email@example.com. Mutual Funds provided through FundEX Investments Inc.