Tax season is here. Before you start filing your taxes, here are 10 tips that may help you reduce your tax bill and may even land you a refund.
1. Plan ahead – Make sure to gather your receipts and NETFILE code, register for My Account, and sign up for direct deposit before April 30. Submitting your income tax and benefit return before the tax-filing deadline means you can avoid having to pay late-filing penalties.
2. Tax-free savings account – A tax-free savings account (TFSA) is one great way to save money, since you don’t pay tax on any income you earn from investments in your TFSA.
3. Registered retirement savings plan – Any income you earn in a registered retirement savings plan (RRSP) is exempt from tax, as long as the funds stay in the plan. RRSPs help you save for your retirement and get a break at tax time too.
4. Public transit tax credit – If you or someone in your family is a regular user of public transit then you may be able to claim a non-refundable tax credit based on the cost of eligible transit passes.
5. Pension income splitting – If you are receiving income from a pension, you can split up to 50% of eligible pension income with your spouse or common-law partner to reduce the taxes you pay.
6. Students – Are you still in school? Students can claim the tuition, education, and textbook amounts. Have you graduated recently? You may be eligible to claim the interest you paid on your student loans.
7. Child care expenses – For those who have children, you may be able to claim child care expenses that you or your spouse or common-law partner paid so that either of you could work, do research, or go to school.
8. Home buyer’s tax credit – If you’re a first-time home buyer you may be eligible to claim $5000 on the purchase of your new home, which can save you up to $750.
For people who are self-employed
9. Hiring an apprentice – Did your business employ an apprentice? A salary paid to an employee registered in a prescribed trade in the first two years of his or her apprenticeship contract qualifies for a non-refundable tax credit for the employer.
10. Creating child care spaces – Did your business (which is not mainly a child care services business) create licensed child care spaces for the children of your employees? If so, you may be eligible for an investment tax credit for the child care spaces you created.
More tips on how best to prepare your 2011 income tax and benefit return can be found online at www.cra.gc.ca/getready.