Tax Saving Tips for Frugal Families
As the old adage goes, the only true certainties in life are death and taxes!
For the average Canadian family the certainty of paying the tax man each year can take a big toll on the household budget. In fact, most Canadians families can count on taxes to be their largest single expense.
According to The Fraser Institute’s Canadian Consumer Tax Index 2012 Edition, 41.5 per cent of the average Canadian’s income was dedicated to paying taxes in 2011, while 33.6 per cent was dedicated to food, shelter and clothing.
With so much of our hard earned income going to the government, it’s no wonder most Canadians dread tax time. However, with a little planning and the right preparation Canadians can gain peace of mind and possibly a little extra cash on their refund this year.
To help your family get the most out of your 2012 tax return, here are a few tips to get organized and take advantage of the many available credits and deductions:
Get Organized: Being organized is essential to making tax time less painful and expensive. Start by gathering your 2011 return, your T4 and T5 slips and any other income related slips. Also include all your bills and receipts for allowable deductions and claims. Having a file or notebook where you can keep track of your income and expenses will make this job easier.
File on Time: The easiest way to get the most out of your 2012 tax return is to file on time. To avoid paying any penalties, or reducing the amount of your return, be sure to file on or before April 30, 2013.
Non-Refundable Tax Credits: The federal and provincial governments offer a variety of non-refundable tax credits for Canadians to take advantage of. The Family Caretaker, Children’s Arts, Children’s Fitness, First Time Home Buyers’ and Volunteer Firefighter tax credits are just a few of the non-refundable credits you can claim to reduce your total taxes payable.
Contribute to Your RRSP: One of the quickest ways to reduce your amount of taxable income is to contribute to a Registered Retirement Savings Plan. Reducing the amount you pay in taxes can increase your refund, which can then be used to pay down credit-card debt or invested in the future.
Keep Your Transit Passes: Don’t throw out the used transit passes. If you take the bus or ride the train to work everyday, you can claim a tax credit for 15 per cent of the money spent on transit.
Student Loan Interest: The small silver lining in student loan debt is that you can claim the interest charged on your student loans.
Claim Your Cell Phone: You can deduct a reasonable amount of your cell phone bill if your employer regularly uses it to call you for work. Just make sure you can trace the percentage used back to your air time.
Claim your Childcare: Childcare expenses are deductible if a single parent or both spouses are working full-time or where one spouse is attending school for all or part of the tax year. You can claim a maximum of $7,000 for each child under the age of seven and $4,000 for each child between the ages of seven and sixteen.
Don’t Lend Your Money to the Government: The tax refund you get year after year is basically YOUR money that the government keeps warm. If you fill out a T1213 Form and hand it over to your employer. They can deduct less of your income. You’ll get more money on your paycheque, but your refund will be significantly smaller come tax season.
Theses are just a few of the many ways Canadians can get the most out of their 2012 Income Tax return. For more ways to save money and take advantage of the deductions and credits offered by the federal and provincial governments, Consolidated Credit has created the informative TAXES: Save Money, Solve Problems guide.