It's that time of year again. Are you dreading tax time? Here are some commonly missed deductions that can help you maximize your refund.
1. The Disability Amount While your province may offer disability support programs, this credit is not to be confused with them. The disability amount is a non-refundable tax credit. What this means is if you’ve paid tax during the year, this credit will help you recover a portion of your tax paid. To qualify, you must be disabled, or support a disabled person. To qualify as a supporting person, you must provide food, shelter or clothing. A T2201 Disability Tax Credit Certificate must be completed by your doctor, and submitted to the Canada Revenue Agency. For 2012, the federal amount is $7546 for an adult or up to $11948 for a child. Provincial rates vary slightly. Dependants may need to use part of this amount against their income first, then the remainder can be transferred to you. CRA will backdate the claim up to 10 years, depending on when the disability started. If they fail to adjust the returns, a manual adjustment can be sent in. The certificate stays on file with CRA, and may periodically need to be updated.
2. The Caregiver Amount You may qualify for this credit if you have a disabled person over 18 living with you. You may also qualify if a parent, or grandparent over 65 (disabled or not) is living with you in a residence you maintain. The maximum federal claim is $4402 for a non-disabled person and $6402 for a disabled person. Again, your dependants’ income may reduce your claim. There is a provincial component and these rates will vary slightly depending on which province you reside in.
3. Medical Expenses Medical expenses can be claimed when they exceed either 3% of your net income, or $2109, whichever is less. Provincial threshold amounts do vary. It is a common misconception that you must take the calendar year, or save up medical receipts until you have enough to qualify. The rule is you may claim a one year time frame ending in the calendar year you are working in. For example if you are currently working on your 2012 tax return, you may choose to claim August 2011-July 2012 if this is more beneficial for you. Many pharmacies and dentists can provide year end statements. Travel expenses including mileage may be claimable when you must travel more than 80 km (one way) to receive medical treatment. Ensure you claim medical premiums you paid through your employer. For lower income persons, you may be eligible for a refundable medical expense supplement. To qualify you must have at least $3,268 of working income.
4. Pension Income Splitting If you are in receipt of a pension from your former employer, you can designate up to 50% of your pension to appear on your spouse’s return. This frequently lowers your tax bracket, and has the potential to substantially boost your refund. Calculating the optimal transfer amount by hand is not for the faint of heart. Software or an experienced tax professional is recommended. A note, CPP, OAS, and lump sum payments do not qualify, only periodic pension payments.
5. Tuition Many parents end up paying for their children’s education. My advice to those parents is: Take the credit for it! When your child is issued their T2202a, have them designate you to claim the tuition. You will need to cross reference some information from your child’s return to ensure the proper transfer amount. Very few recent graduates have luck finding lucrative jobs right after graduation. It may take them several years to find good paying employment before they can make use of tuition carry forward amounts. A maximum of $5000 federally can be transferred, provincial amounts vary. When your child is enrolled in a full time program, they can usually transfer the maximum to their parents, and still have a portion left to carry forward to a future year. It’s a win-win situation.