When life milestones give you a tax boost

Tax expert explains why people could be missing out after they get married, have a baby or move house

When life milestones give you a tax boost

Just had a baby? Got married? Purchased your new home? Congratulations … but it’s time to talk tax.

Life milestones like these are a time of great celebration and emotion, but H&R Block said many people get caught up in the moment so much that they miss out on numerous tax breaks.

Lisa Gittens, an H&R Block Canada senior tax professional, said this is where advisors can step in to remind clients that their situation could be even better by ensuring some extra cash in their wallet.

“These are things we don’t face on a day-to-day basis,” she said. “They happen once every few years and so when they happen they catch us by surprise. We get caught up in all the planning and all the details of that event and we don’t necessarily have the time to think about how this is going to impact your taxes.”

The flipside is that it’s on you to tell Revenue Canada about the changes in your life in order to be eligible for certain credits and deductions. This can be done online, by mail or via phone; doing so online gives you instant access to not only this year’s tax year but also previous years.

For new parents who fail to tell Revenue Canada of their exciting news, the money they are missing out on is substantial.

Gittens said: “The minute you register the birth of your child, now you benefit for Canada child benefit. That’s a big one. If you got married and then have a child, here’s the thing: both parents must file in order to receive the Canada child benefit.

“Once you’ve updated your marital status and made Revenue Canada aware of the birth of your child, that’s an extra $533 a month of income [you can claim] while that child is under 6 years old. If you haven’t filed before, you can go back and make adjustments but you have to let Revenue Canada know.”

For those taking time off with their little one, they may also be eligible for Employment Insurance benefits, which need to be claimed as income on their tax return. Canadian parents can also claim expenses, including daycare, while more recently, the cost of assisted reproductive technologies to assist with getting pregnant can now also be claimed as a medical expense.

Couples that have got hitched (RC65 Marital status change form) are entitled to spousal credit, if a spouse has a low income, and other medical expenses, while married couples can also pool together receipts for charitable donations. Then there are RRSP contributions; once you’ve tied the knot you can contribute to your spouse’s RRSP and claim the deduction on your tax return.

Gittens said: “There’s the old saying – the only two things in life that are certain are death and taxes, so no matter what is happening in your life, it is going to affect your tax return. That still seems to catch most individuals by surprise.”

Moving house is a pain, by and large, but first-time buyers can take advantage of the First-time Home Buyers’ Tax Credit and the Home Buyers’ plan.

Gittens said that first-time buyers need to be aware of a federal credit of $5,000, which could potentially be topped up by provincial credit. “In Saskatchewan,” she said, “there is additional provincial credit of up to $10,000.”

Buyers can also tap into their RRSP to help with the down payment as part of the Home Buyers’ Plan and borrow up to $25,000 in one year, tax free, providing they repay the loan back into the RRSP within 15 years.

Gittens said: “If you live in Ontario, for example, and move to BC and the reason you moved is for work, did you know you could claim your moving expenses? People are not aware of it.”

She added:  “One of our mottos at H&R Block is, we look at your life through taxes to help you get what is yours, and one of our obligations every year is when you come in to do your taxes we ask you, are there any changes?”

 

Related stories:
The risks of snowbirds failing to report assets
How to avoid financial infidelity

LATEST NEWS