Everyone wants a bigger tax return come April; it’s about the only thing that could be good about this time of year! Whether you are a ‘starving student’, a middle class family or a single worker, getting a bigger tax return is important and has to be managed right from square one. There are some easy ways to get a bigger tax return and here are the easiest ways that will both put money in your pocket now and let you feel good about doing it.
Registered retirement savings plans are plans that employees get put on them or they put on themselves that allow them to save for retirement. They are important for the nest egg for old age, but they also add a nice deduction to your income tax filing and give you a bigger tax return. Keep in mind your caps however; in Canada, you can only claim up to a certain percentage of your year’s income on your tax return; the rest is rolled over to the next year. (Look at your last tax assessment for an idea of your caps or call your tax agency). And remember: if you put in, you get back more on your return, but if you withdraw from your RRSP, you may get hammered, so leave the money alone unless you really need it.
If you own your own business, it’s a good idea to start kicking into your RRSP as well. Even if you can only put in a few dollars a month, it is all tax-deductible and it’s a good idea to keep your eye to the future.
Donations beyond a certain point (usually $15-$20) are tax-deductible! If you donate to a cause, you should get an income tax form around tax time from the charity that tells the tax agency you donated. Not only can you feel good giving to the needy, but you can get a nice kickback on your income tax return as well, so donate!
Keep Your Receipts
This is particularly important if you own a home based business: Keep your receipts! When I did my taxes, I was amazed at what I could write off; I wrote off things such as a replacement power cord for my work computer! Keep receipts for anything you buy for your business from pens to photocopiers to computers and keep your utilities receipts as well. You can write off a portion of your utility bills and even your phone bills and lower your taxes considerably.
If you work outside the home or you’re a student, you can still find deductions. For example, students and employees can write off bus passes and students can sometimes write off text books! KEEP YOUR RECEIPTS!
Kids are a great way to lower your taxes. They are considered dependents and so you get money just for having them around, plus things like sports and daycare are tax-deductible. You can also get Family allowance checks to aid in the monthly costs and an increase in your GST/HST checks if applicable.
Of course you shouldn’t have children just to help around tax time, but if you do have kids, keep track of the receipts and make sure you know what can be written off. Keep in mind that Registered Education Savings Plans (RESPs) are NOT tax-deductible, nor are they taxable until your child withdraws the money and then it’s low taxes or none for the child since it’s assumed that is the only money he or she will have for income. Also keep in mind that the Universal Child Benefit check IS taxable, so keep your income tax receipt and make sure it’s assigned to the right person-usually the one who makes the least amount of money, however, Baby checks/Family Allowance is not taxable, so it’s safe.
There are other ways to claim tax deductions and get a bigger tax return, but these are some of the simplest ways to go about it. Talk to an accountant if you are interested in all of the different ways to get a larger return or check your government’s tax agency for ideas.