Manulife – Reduce your taxes and keep more of your money

There are a variety of ways to reduce the amount of income tax you pay and keep more of your money at tax time. By taking advantage of all possible tax deductions and credits, you’ll free up more money to put towards your investments, your emergency savings, or other important goals.

Federal income tax rules provide you with a number of potential tax credits and deductions. You must claim them when filing a tax return. Note that the Canada Revenue Agency (CRA) will not inform you if you miss a deduction that you could be eligible for.

Benefit from tax deductions and tax creditsTaxes-image-re-sized

Tax deductions will reduce your taxable income so the reduction will be reflected at your marginal tax rate. Non-refundable tax credits can also reduce your tax owing, but are generally calculated at the lowest tax rate.  Each year’s federal budget introduces at least a few new deductions as well as tax credits for taxpayers. Familiarize yourself with these so that you can claim any that are applicable to your situation.

Filing your tax return

We all have to pay income tax, but there are ways to minimize the taxes we pay. Here are a few of the things to keep in mind when preparing to file your annual income tax return:

  1. Any income earned in a Registered Retirement Savings Plan (RRSP) is exempt from tax as long as the funds remain in the plan.
  2. RRSP contributions have to be reported on your tax return, but do not have to be deducted in the year they are made. You can carry forward your contribution indefinitely and use it when you like – for example, when you’re in a higher income bracket and need the deduction.
  3. Don’t skip filing a tax return, even if your income is low. Filing assists CRA in tracking your RRSP contribution room, which can be carried forward indefinitely and used in the future when needed.
  4. The income earned in a Tax Free Savings Account (TFSA) is tax exempt. However, over contributions in a year will be subject to tax consequences assessed by the CRA.
  5. Capital losses from selling shares in a non-registered investment (except your TFSA) can be applied to any of the previous three years or carried forward indefinitely. These can be applied against any capital gains, reducing your total income.
  6. Carrying costs incurred to earn income on your investments can be deducted from your income. Fees paid for managing your investments, other than commissions, are also eligible.
  7. Single parents receiving child care benefits could be eligible for additional tax benefits.
  8. Do you regularly travel to work by bus, train, subway or ferry? You or your spouse1 may be able to claim the cost of your transit passes to take advantage of the public transit tax credit.
  9. Are you self-employed? You could benefit from a number of tax deductions.

1Includes a spouse or common-law partner as defined by the Income Tax Act (Canada).

Are you missing out on tax deductions and tax credits?

If any of the following situations apply to you, you could be eligible for certain tax deductions and tax credits when filing your return – consult a tax professional for advice.

  • You made RRSP contributions in the current tax year, or within the first 60 days of the following year
  • You paid union dues or payments to a professional organization
  • You had payments for childcare, including after school programs
  • You made payments for alimony or spousal support
  • You supported dependents at any time during the year
  • You or your spouse or partner1 are age 65 or older
  • You or your spouse or partner receive a pension income
  • You or your spouse or partner have dependents that are disabled
  • You paid interest on a student loan or paid tuition fees
  • You made donations to a registered charity or political party
  • You borrowed money for investment purposes and paid interest on the loan
  • You paid a professional a fee to manage your investments
  • You bought investments and sold them at a loss
  • You changed employment and moved closer to your work
  • You used your personal vehicle for your work or received an allowance from your employer for work related expenses
  • You had a home office, or paid for office supplies or other work expenses as part of your work arrangement
  • You were paid in full or in part by commissions
  • You paid legal fees to enforce payment of any support payments, or to defend an employment contract
  • You paid for medical expenses or made payments to a health plan at work or privately
  • You lived in a same sex relationship, were married, or living common law
  • You are self-employed
  • You have deductions carried forward from prior years such as RRSP contributions, charitable donations, student loan interest, home office expenses, or capital losses

Consult your tax consultant for further information and professional advice on how best to reduce your taxes by utilizing all available deductions and tax credits.

1Includes a spouse or common-law partner as defined by the Income Tax Act (Canada).

It’s a good idea to be pro-active when it comes to reducing your income taxes. A little advance planning early in the year could shave a significant amount off your annual tax bill.