13 tax tips for 2013
Spring has been missing in action throughout most of Canada. And while the daffodils may have to wait, the taxman will not. Just to keep us on our toes, there are, as usual, a host of changes from the Canada Revenue Agency (CRA) as well as some often overlooked items.
Here are 13 tips for the 2013 tax year to make your filing more accurate and, hopefully, less expensive.
1. Holiday hangover: That great boss of yours threw a big holiday party in December. You had a wonderful time overeating, overdrinking and generally misbehaving. Now you must pay.
If the cost of the celebration was $100 per person or more, including transportation and accommodation, it qualifies as a taxable benefit. Also, a survey by H&R Block Canada found that almost half of Canadians think that employer sponsored non-cash benefits such as hockey tickets, are not taxable. They are indeed, for any amount over $500.
2. Charitable windfall: If you donated for the first time in 2013 you’ll get an additional 25 per cent tax credit on amounts up to $1,000. The credit can be shared with your spouse.
3. Small businesses beware: Only 50 per cent of food expenses are deductible, down from 75 per cent in years gone by. If you pay a hotel bill and it includes meals make sure you separate the food portion when filing your expenses.
4. Depreciate this: Small businesses or the self-employed can depreciate capital assets such as furniture, fixtures, technology and other equipment. You can write off the depreciated amount annually which varies from 20 per cent for furniture to 55 per cent for software.
5. Claim your space: If you are partially or completely self-employed and spend 50 per cent or more of your time in a home workspace that is separate from the rest of the living area, you can claim a portion of household expenses. However, there must be income earned. You can carry forward amounts if expenses exceed earnings.
6. No return, no benefits: Be sure to file even if you had little or no income in 2013. You won’t be penalized but you may miss out on refundable benefits such as the HST/GST credit or the Canada Child Tax Benefit. Evelyn Jacks, author of 51 books on tax and financial management, recommends that families file together, starting with the lowest income earner in order to maximize the transfer of transferrable tax credits and expenses such as medical.
7. Caregiver break: The Family Caregiver Amount has risen to $2,043. This credit was new for the 2012 tax year. You must have a doctor’s letter describing the infirmity and its likely duration. If the person has qualified for the Disability Tax Credit, that will suffice.
8. And more help: Caregivers don’t get much financial support from the government so don’t forget to claim $4,490 if you are supporting (in your home) a physically or mentally infirm relative including an uncle, aunt, niece or nephew over 18. The claim can be split between two people.
9. Medical or Support claim? For those with disabilities and working, Evelyn Jacks points out it is usually better to claim support expenses (equipment, services, attendant care) in the Disability Supports Deduction category. Claiming those expenses as medical reduces net income which affects tax credits.
10. Northerners pay less tax: The land of the midnight sun gives residents deductions based on income and the number of days spent in the north. The list of areas and amounts are on the CRA’s website.
11. Students should file: “Students qualify for some of the most generous tax credits available so it is important they understand how to maximize their tax return and claim everything they are entitled to,” maintains Cleo Hamel, Senior Tax Analyst for H&R Block Canada. However, the majority of students (85 per cent) are sadly lacking in any tax knowledge at all.
12. Transit credit: Most people are familiar with the public transit claim but be sure that the amount is for a monthly service comprising at least 32 one-way trips or covering a five to seven day period weekly. Either spouse can claim the amount, including transit payments for children under 19. (You can’t claim car-pooling or private transport services.)
13. Uncle Sam never lets go: Americans by birth who are living in Canada are required to file a tax return in the U.S. This outrages many accidental Americans born in the U.S. to Canadian parents who lived there for only a short period. The new Foreign Account Tax Compliance Act , which obliges Canadian institutions to report Americans with Canadian bank accounts to the U.S., is going to make it more difficult for U.S. citizens to avoid the tax-filing requirement.