Aha... I see... who knew?!
Many clients I work with know the basics of filing taxes -- when they need to file, when to expect T4s and when the RRSP contribution deadline is, for example. But, even after mastering the basics of tax preparation and filing, a lot of filers will often find out new things about their tax returns that end up delivering a few more benefits along the way. I call these tax "aha!" moments.
Here are some of my top "aha!" moments:
1. Gluten-free foods
If you suffer from celiac disease, you can claim the incremental costs associated with purchasing gluten-free products like gluten-free bread, bagels and muffins. The incremental cost is the difference between the cost of the gluten-free product minus the cost of a similar food item which is not gluten-free.
2. Medical marijuana
The Canada Revenue Agency (CRA) confirmed last year it will allow the costs of medical marijuana purchased from a licensed producer as a medical expense.
3. Charitable donations
While claiming charitable donations can help reduce your tax obligation, most Canadians don't know they are not allowed to claim donations to a business or non-profit society that is not registered with the CRA. If an organization is not included in the CRA's Charities Listings it cannot issue official donation receipts. And, without an official donation receipt, you cannot claim that donation on your return. So make sure the receipt you get has a Registered Charity Number if you intend to claim it.
4. Maternity leave and Employment Insurance
If you are on maternity leave or eligible to receive Employment Insurance (EI), the Canadian government typically doesn't withhold the full amount of tax that you will be liable for when you file your tax return. That's because it is assumed the EI is the only income you will receive that year. It is therefore a good practice to set aside at least five per cent of those payments so that you can meet the meet the minimum federal tax bracket of 15 per cent and avoid the unwelcome surprise of owing come tax time.
5. Self-employment
If you are self-employed, you can take advantage of tax deductions that other workers cannot. For example, a portion of the cost of utilities or even rent for your home office can be deducted, as well as magazines you subscribe to or member organizations in your career field.
6. Parents of students
Eligible students who have unused tuition and education credits have two options. The first is to transfer up to $5,000 in unused tuition and education/textbook credits to a parent, grandparent or spouse to help them reduce their tax obligation. The second option is to carry forward the amount so it can be claimed in a future year. The "aha!" moment, in this case, is for the parent or grandparent, who must ensure the student has filed first before they claim the credits on their own tax return.
7. Insurance
Many Canadians purchase travel medical insurance when they are out of the country, but don't realize they can actually claim it. Keep in mind that only medical insurance, not trip cancellation insurance, is considered a medical expense.
8. Transit
Monthly transit passes or passes of longer duration like annual passes for travel within Canada are a tax credit. Even if you qualify for a subsidy, you can claim the out-of-pocket expenses.
Every year, Canadians have an opportunity to find ways to get back the money they earned come tax time. By preparing early, getting organized and filing on time, Canadians will give themselves the best chance to maximize their return this tax season.
And, if you're so inclined, feel free to share your "aha!" moments in the comments section below.
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