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Are You Deducting All You Can This Tax Season?

04/05/2013 12:09 EDT | Updated 06/05/2013 05:12 EDT

The first few years of filing a tax return are usually easy: you have one T4 slip with your employment income and no deductions. But even with only one or two slips, you should still be aware of the deductions you can claim. And even if you don't claim them on your 2012 return, they could help next year.

Disability Tax Credit

People often ignore the Disability Tax Credit (DTC) because they don't think they qualify. The impairment must be severe and prolonged, and eligibility for the credit can only be certified by a medical practitioner. However, some people who are eligible don't realize it until it is pointed out by a tax professional, because physicians typically do not suggest people apply in the course of their practice.

The DTC is meant to help offset some of the costs of being disabled. For example, some Type 1 diabetes patients can qualify for the DTC depending on how many hours a day they monitor their condition.

You do need to have taxable income, like employment income, and your doctor has to complete a T2201 Form - Disability Tax Credit Certificate and send it to the CRA for approval before you can make the claim. Once approved, you can claim the credit and you may even be able to access it retroactively. If you can't use the entire amount yourself, you can also transfer it to a spouse or parent. The federal savings are $1,131 and there will be a provincial portion to the credit as well.

There is no special formula to claim the DTC, as it depends on your condition. A special preparer or company is not required to complete the forms, so you can save the 20 to 30 per cent of your refund that would be charged. Form T2201 is available on the CRA's website and the process is simple.

Caregiver Amount

This amount is meant to provide some tax relief for people caring for a family member at home. So if your parents have moved into your house because they can no longer live alone or you care for a disabled member of your family, you may qualify.

The caregiver amount does depend on the income of the person you are caring for and, in the case of parents, their age. If your parents are younger than 65, they have to be disabled or infirm before you can claim the caregiver amount, and their income will also be a factor. If older than 65, only their income is used in the calculation.

The caregiver amount results in $660 of federal tax savings. And if you qualify for the new Family Caregiver Amount, the federal tax savings increase to $960.

Medical expenses

Whether medical expenses result in tax savings depends on your income. The more receipts and expenses you have, the greater the chance you can make a claim. So knowing what you can claim is important. If you pay premiums towards your employee health plan, you can claim them as well as any deductibles or amounts you are required to pay.

If you take a trip and purchase health insurance, this is a medical expense. Depending on where you live, you may be able to claim registered massage therapy, physiotherapy, acupuncture, chiropractic care and naturopath appointments.

Ironically, you cannot claim items that can help keep you healthy, like vitamins, gym memberships or fitness classes.

Fixing past mistakes

If you discover you missed a tax deduction or credit, it is not lost. You are allowed to file amendments to your tax returns for up to 10 years. You have to prepare a T1 Adjustment Request form for every year you need to revise. The forms have to be mailed to the CRA and can take a little longer to process, so do not spend your anticipated refund right away.

You will need to include your supporting documentation or receipts for any adjustment request. Make sure you keep photocopies of your receipts, in case the CRA misplaces them. Without receipts, you cannot file an adjustment.

No matter how you prepare your return, you should have some basic understanding of the types of expenses you can claim. You may not need to know the details this year but once your situation becomes more complex, you do not want to regret throwing away receipts. No one wants to pay the government more tax than they actually need to.

And that's what paying attention to these overlooked deductions is about: keeping a little more money in your pocket.

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