Apr
6
By Fin MacDonald
Fin MacDonald has over 20 years’ experience providing retirement and Income tax planning advice. Readers are however cautioned that responsibility falls on the taxpayer to ensure that all information is adequate and correct.
As we get closer to this year’s Income Tax Filing Deadline of Thursday April 30 I’m going to look at new deductions, deductions that have been improved and deductions as viewed by where you, dear readers, are in life’s journey. Using my lens of Helping You to Keep More of YOUR Money I’ll start with new deductions. But first, let’s look at the two different kinds of ‘deductions’. Properly, the only kinds of deductions are those that serve to lower your income. Examples are RRSP or Pension Contributions, Union Dues or Child Care Expenses. The other ‘deductions’, such as Basic Personal and Age Amounts, Charitable Donations, Medical Expenses and Tuition and Education Amounts, are actually Non-Refundable Tax Credits that serve to lower the amount of tax you have payable.
New Deductions
As mentioned last month, the main tax change is the “Family Tax Cut”. This allows two parent families to split income to save up to $2,000 in Federal Tax. This might be called “Income Splitting Lite” as it will benefit so few people and will not reduce Provincial Tax payable. By the time you read this Finance Minister Joe Oliver may finally have delivered the Federal Budget and introduced changes to the FTC for the 2015 tax year.
The Safety Deposit Box fee had been allowed in the past but is no longer deductible with the 2014 return.
The only other new Deduction is the expansion of the $3,000 Volunteer Firefighters’ Amount to include Search and Rescue Volunteers. As with the FTC, this credit is only for Federal Tax – it allows for a savings of up to $450.
Improved Deductions
The Adoption Expenses Credit has been increased from a maximum of $11,669 per child to $15,000 per child. The Children’s Fitness Amount has increased from a maximum of $500 per child to $1,000 per child. The time available to deduct Cultural Gifts has been raised from the five years that apply to other charitable donations to ten years. Some minor tweaking of what is and what is not deductible as a medical expense was done. However alarm systems like Phillips LifeLine are still not deductible.
Deductions Available to All
Basic Personal Amount, Age Amount, Spousal Amount &/or Amount for an eligible Dependant are available. The Basic Personal Amount does not decrease as your income rises; the Age and Spousal and Eligible Dependant credits do decrease as the income increases. Public Transit Passes are deductible, either by each individual or by one person for the whole family.
Here are some examples: If you are a single parent with a child, you may deduct $11,138 for the child under what used to be called the “Equivalent to Married” credit. All children under 19 earn you a credit of $2,255 – if they are disabled there is also a credit of $2,058 available. Also available for parents are the Children’s Fitness and Children’s Arts credits. As the kids head off to post-secondary schooling the Tuition and Education Credits that they earn may be transferred to a maximum of $5,000 per student if the student doesn’t need the credit. The student can deduct the interest paid on her/his student loan; this can be saved up for five years to make an impact.
For working people there are a variety of credits. Canada Employment amounts and all the premiums paid to Canada Pension Plan and Employment Insurance are deductible. Did you move to begin new employment? If you moved more than 40 km closer to your new work there is a wide variety of expenses available, from commissions on the sale of your old home to the Property Transfer Tax on the purchase of the new. These are in addition to others such as mover’s bills, meals and gas and mileage while moving.
The Pension Income Amount of $2,000 is available to all with eligible pension income – another good reason for pension splitting if one spouse does not have their own pension income. Medical Expenses and Charitable Donations are two very common deductions for seniors and others advanced in life’s journey. The last few years a Refundable Medical Expense Supplement has been available but the requirement that the taxpayer have at least $3,363 in employment or self-employment income has made this very difficult for seniors to qualify for.
Next month – Tax Planning for 2015.