Many Canadians are feeling the pressure to complete their 2016 tax returns in time for the May 1 deadline. That means now’s a good time to tell clients some ways to save on tax costs.
Jamie Golombek, Managing Director of Tax & Estate Planning with the CIBC Wealth Strategies Group, highlighted some lesser-known tax tips in a special to the Financial Post
For a broader look at Wealth Professional's latest industry news, click here.
How to differentiate yourself during tax season
Are you doing enough to help business owning clients?
- Those paying for private health insurance, whether on their own or via their work plan, may qualify for the Medical Expense Tax Credit (METC). Covering most medical, dental, and hospitalization plans, the benefit consists of a 15% federal credit and a provincial credit for valid medical expenses. The expenses should exceed either $2,237 or 3% of the person’s net income, whichever is less.
- Individuals who pay for gluten-free products — a medical necessity for those with celiac disease — are also entitled to the METC. The difference in cost between gluten-free products and similar gluten-containing products can be counted toward the credit.
- Pooling charitable donations on a single return could also be ideal for married or common-law partners. Charitable donations attract both federal and provincial non-refundable tax credit, but the first $200 of annual donations just earns a federal credit of 15%, while donations past that get a credit of 29%.
- Canadians who haven’t claimed a donation credit since after 2007 can get an additional 25% non-refundable First-Time Donor’s Super Credit on up to $1,000 of donations. If a client has a common-law partner or spouse and either of them declared a donation any time after 2007, then neither of them is eligible. This credit, which can be claimed just once, will expire at the end of the year.
- First-time home buyers who bought a home last year can claim a 15% non-refundable credit on an amount of $5,000.
- Parents whose children earned from part-time or summer jobs may want to get returns filed on their kids’ behalf. The kids might not be able to make RRSP contributions yet, but declaring a few thousand dollars of income now may help protect some of their future earnings.
- Those who have pension income and are married or living common law split up to 50% of their pension with their partner or spouse, which can result in tax savings if their significant other is in a lower bracket. In some cases, that splitting can also preserve the age credit and even Old Age Security payments.
- Canadians who got pension income in 2016 can claim a federal pension income credit worth 15%. Those aged 65 or older who make RRIF withdrawals are also eligible for that pension amount.
- Interest payments made on a student loan — which was taken out under the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Apprentice Loans Act, or a similar provincial/territorial act — may also qualify for a 15% federal tax credit.
- Finally, Canadians who are over 65 or are eligible for the disability tax credit can claim a credit of up to 15% on up to $10,000 worth of home renovation or alteration they had done so they can live independently.