Wednesday, February 07, 2007

Tax Time in Canada

Most likely by now you have your paper work for your taxes or your access code if you e-file, so it is time to think about doing your paperwork for your taxes. I was thinking about mine and I thought perhaps I should share a few ideas on dropping that tax load.

1) Know your deductions that you could claim. Some of the often overlooked ones are:
- moving expenses if you move to a new job more than 40 km
- medical expenses which can be claimed in the name of the lower income earner of your household
- keeping taxable investments in the lower income earners name (see a few great articles on the types of investment income over at Million Dollar Journey - Part I, Part II)
-if you live in anywhere fairly far north check if you can claim northern living allowance (they have two zones which qualify, and you would be surprised how far south it goes)
-Using Spousal RRSP's to get the biggest tax break possible if you and your spouse are in different tax brackets
-donations to a political party offer a better break than a charity

2) Consider doing the bookkeeping on anything you do to earn money beyond your day job. If you claim it as a small business ( sole proprietorship) you can write off reasonable expenses from the income you earned and don't have to register the business (check you local Provincial law to make sure). This takes a bit of setup work, but can often be a big saver if you do the work up front.

3) Learn which tax credits can be transferred between you and your spouse and run both sets of numbers to ensure the biggest return.

4) Pay attention to those Federal/Provincial budgets and find out which tax breaks start in the current tax year if your not sure check out taxtips.ca(they often update everything at least once a month).

That's just a few simple tips. If you have your own favorite, please share with a comment.

4 comments:

MillionDollarJourney.com said...


keeping taxable investments in the lower income earners name


Careful with this statement Mr. Dream. Whoever's money goes into investing in the asset is the person who can claim it. It can't arbitrarily be claimed with the lower income spouses tax return.

FT
http://www.MillionDollarJourney.com

Canadian Dream said...

FT,

That was a poor choice of wording. You want to have taxable investments in the account of the lower income earner was what I was trying to get at.

I know I can't have an investment in my account and try to claim it as my spouses.

CD

larry macdonald said...

What about defining blogging as a part-time business and claiming a portion of one's mortgage and utilities etc. as expenses relating to a home office?

Canadian Dream said...

Larry,

I have actually thought about that for myself, but I was waiting to see how I do as an income for a while. You still have to have a reasonable profit from it, but as long as your income out paced your deductions it should be possible.

I would still have the small complication of using my house for two small businesses.

For anyone who is curious read the following.

http://www.cra-arc.gc.ca/tax/business/topics/solepartner/businessexpenses/menu-e.html

CD