No one wants to pay more tax than they must, so taking advantage of tax credits and deductions can result in a lower tax bill. Here are some of the most commonly missed deductions and mistakes Canadians make on their returns:
1 Medical expenses: The amount of medical expenses you can claim depends on your income, but the more expenses you have, the greater the chance you can save some tax. So make sure you collect your receipts and slips throughout the year. The healthcare premiums you pay at work are considered a medical expense, as well as health travel insurance, hearing aid batteries, deductibles not covered by your health plan and orthodontics for non-cosmetic reasons.
2 Disability Tax Credit: Even though you must have a severe and prolonged impairment in order to qualify, many people do not realize they meet these conditions until it is pointed out to them by a tax professional. Eligibility for the disability tax credit can only be certified by a medical practitioner, yet physicians do not typically suggest that you apply in the course of their practice. If you think you may qualify, you need to have your doctor complete a T2201 Disability Tax Credit Certificate and get approval from the Canada Revenue Agency.
3 Charitable donations: You can claim up to six years worth of charitable donations to maximize your tax savings. You only receive a federal tax credit of 15 per cent for the first $200 worth of donations, but 29 percent for every dollar over $200. Plus there are provincial tax credits as well, so generosity does have its benefits. And make sure you save all your charitable donation receipts from the year.
4 Amount for eligible dependant: Single parents can claim the child amount as well as the amount for an eligible dependant for children under 18. In the case of the child amount, the child must be under 18 at the end of the year. However, in the case of the amount for an eligible dependant, the child need only be under 18 at some time in the year. But if the child earned income, it will be subtracted from the credit amount.
5 Childcare expenses: If you pay a family member or a neighbour to look after your children, the cost is still considered a childcare expense. However, you will need a receipt from the childcare provider that includes a Social Insurance Number, so he or she will need to report the income. Childcare expenses normally have to be claimed against earned income although there is an exception if you are a single parent going to school.
If you find you missed a deduction or credit, you can file a T1 Adjustment Request to amend your previous returns. It may only add up to a few dollars but no one wants to overpay the government.