April 2013 may seem a long way off, but as the calendar year draws to a close now is a good time to take a look at what you can do to take advantage of tax credits and deductions and leave more money in your wallet and less on your 2012 tax bill.
“Tax planning should be a year-round activity, not a last-minute afterthought,” said John Waters, vice-president and head of tax and estate planning with BMO Nesbitt Burns. “There are many ways Canadians can reduce their 2012 tax bills, particularly if they act before the end of the calendar year.”
A recent survey conducted for H&R Block found that only three in 10 Canadians are planning to do something before the end of the year to help with their 2012 returns.
Thirty-six per cent said they had no plans and 29 per cent had not thought about it.
You can start the process with some basic housekeeping activities, like opening a tax envelope or folder and starting to collect whatever slips or receipts you can and adding them as they come in between now and the tax deadline.
Trying to find your slips just before the tax deadline is never a good thing.
You can wait to file your return until the last day, but at least have all your slips and receipts together.
If you want to claim a charitable donation on your 2012 return, you have to make it before Dec. 31. If you have already made more than $200 in donations in 2012, it will be worth a 29 per cent federal tax credit instead of the 15 per cent for donations under $200.
For a bigger tax break, spouses can pool their contributions and donations and claim them in the year they made them or carry them forward for up to five years.
Now also is a good time to review your stock portfolio. The markets rose and fell in 2012, so many people may still be facing capital losses on their investments from previous years.
Dec. 23 is the deadline for making a trade if you want it recorded on your 2012 tax return. Capital losses can be carried back three years or carried forward indefinitely.
Fees for day care, summer camp or boarding school for children under 16 can be deducted if parents either are working or attending school full time. Also, you can reduce your tax by claiming either all or part of expenses related to a medical impediment.
Some of the lesser-known expenses that can be claimed include hearing aids, guide dogs for the blind, bathroom aids, attendant care for people with a disability, an air conditioner to ease a severe respiratory ailment, incremental expenses to provide accessible housing (such as home renovations to ease mobility), incremental costs to acquire gluten-free products for people with celiac disease and tutoring services for people with a learning disability.
Spouses who share the costs for these expenses can pool their claims for greater savings.
If you are single, divorced or separated you may be eligible for the equivalent-to-spouse credit and, for tax purposes, claim children under 18 or any other family members who live with you and are dependants.
People with a severe or prolonged mental or physical disability can apply for the disability credit if the disability significantly impedes their ability to perform routine tasks of daily life.
“The disability must be certified by a medical doctor or related health professional such as an optometrist, occupational therapist or psychologist,” Waters explained. “If you were eligible in the past but did not apply for the credit during that tax year, it may be possible to retroactively apply as long as a health professional can clarify the date of the onset of the disability.”
Canadian families providing in-home care for a dependant adult relative, including an aging parent or other relative with a mental or physical impairment, may be eligible for the caregiver tax credit provided the dependant’s net income is below certain threshold amount.
“By being forward-thinking, doing some research and identifying the credits and deductions that apply to you, you can keep more money in your pocket,” Waters said.
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.