From gluten-free products to pooling donations, here are 10 lesser-known tax tips to boost your return
The Easter long weekend is the time when many of us finally sit down to complete our 2016 tax returns to make sure they can be filed by the May 1 deadline. Here are 10 perhaps lesser-known quick tips that may save you some extra cash when filing your returns.
Private health service plan premiums
If you pay for private health insurance, either directly or indirectly through your work plan, the cost of your premiums will generally qualify for the medical expense tax credit (METC). These plans include most medical, dental and hospitalization plans. For the 2016 tax year, valid medical expenses qualify for a 15 per cent federal credit as well as a provincial credit, provided they exceed a minimum threshold equal to the lesser of 3 per cent of your net income or $2,237.
Individuals with celiac disease (gluten intolerance) can claim the incremental costs associated with buying gluten-free products as a medical expense, eligible for the METC, as discussed above. The incremental cost is the difference in the cost of gluten-free products compared to the cost of similar products with gluten, calculated by subtracting the cost of a product with gluten from the cost of a gluten-free product.
The food products eligible for this expense are limited to those produced and marketed specifically for gluten-free diets, such as gluten-free bread; however, other products, such as rice flour and gluten-free spices, can also be eligible if they are used by the person with celiac disease to make their own gluten-free products. Note that if several people in your household eat the gluten-free product, the Canada Revenue Agency requires you to prorate the eligible costs between the portion eaten by the person with celiac disease and everybody else.
Pooling donation claims
If you’re married or living common-law, consider pooling both spouses’ or partners’ donations on one return. That’s because charitable donations attract both federal and provincial non-refundable tax credits, but lower amounts on the first $200. For example, on the federal side, you get a credit of 15 per cent for the first $200 of annual charitable donations. The federal credit rate jumps to 29 per cent for cumulative donations above $200. Also, in a province like Ontario which has a high-income surtax, a high-income spouse or partner should claim all the donations since there is a provincial surtax savings on top of the provincial donation credit.
First-Time Donor’s Super Credit
First-time donors can take advantage of the temporary First-Time Donor’s Super Credit, which provides an additional 25 per cent non-refundable tax credit on up to $1,000 of donations. A first-time donor is someone who hasn’t claimed a donation credit after 2007. If you’re married or living common law, neither you nor your spouse qualify if either of you has made a donation after 2007. The FDSC can only be claimed once and expires at the end of this year.
Home buyers’ amount
If you are a “first-time home buyer,” you can claim a $5,000 amount, eligible for a 15 per cent non-refundable credit, for the purchase of a qualifying home in 2016 provided you bought the home last year and you were considered a first-time home buyer. You qualify if you did not live in another home owned by you or your spouse or common-law partner last year (2016) or in any of the four preceding years.
File returns for minors
While most children don’t have enough taxable income to warrant filing a return, it may be worth doing if they have some earned income which could create eligibility for future RRSP contributions. While it may be years before they actually make an RRSP contribution, especially since the advent of the potentially more beneficial TFSA, reporting a couple thousand dollars of part-time or summer employment income on a child’s tax return may help them shelter some of their future earnings later in life.
Split pension income
If you have pension income and are married or living common-law, be sure to consider pension income splitting which allows you to transfer up to 50 per cent of your pension income to your spouse or partner, provided they agree! This can not only save you tax if the transferee spouse or partner is in a lower tax-bracket, but, in some cases, it can preserve the age credit and even Old Age Security payments.
Claim the $2,000 pension amount
If you received pension income in 2016, be sure to claim the pension income credit, worth 15 per cent federally. Note that once you are 65 years old, RRIF withdrawals (not RRSP withdrawals) qualify for this pension amount.
Interest paid on student loans
If you paid interest on a student loan in 2016, that interest may qualify for a 15 per cent non-refundable federal tax credit provided the loan 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. If you have no tax payable for 2016, perhaps due to the basic personal credit, tuition, education and textbook tax credits, you can carry the interest forward and apply it on your return for any of the next five years.
Note that you can’t claim the interest paid on any other kind of loan. For example, if you renegotiated your student loan with a bank or financial institution, the interest on the new loan does not qualify for the tax credit.
Home accessibility tax credit (HATC)
Finally, if you’re over 65 or qualify for the disability tax credit, and you made renovations to your home last year to help you live more independently, you can claim a non-refundable credit worth 15 per cent on up to $10,000 of eligible renovations or alteration expenses. Note that if your renovation expenses qualify for the METC, you can claim both the HATC and the METC for the same expenses.