The Learning Centre:
Tax time tips to maximize your return
If you still haven’t filed your tax return, you’re not alone. According to various income tax services, 55% of Canadians file their returns within the final two weeks of the April 30th deadline.
Since March tends to be a busy time for education members (I.e. marking midterms, March break, planning out the final stretch of the school year), make sure you leave yourself plenty of time to not just file your return—but to make sure you’ve captured all of your eligible tax credits.
New as of this year: disability claims for Type 1 diabetics.
If you’re diabetic, you may recall that since May 2017, the Canada Revenue Agency denied disability claims for Type 1 diabetes—however, in December 2017 the CRA reversed this decision. So if you’re diabetic, be sure to file your receipts that detail how much time/money you spent on life-sustaining therapy in 2017 in order to get back the money that is owed to you.
Have kids? Be sure to cash in on all eligible tax credits.
According to a recent survey by tax filing software ‘TurboTax’, 93% of Canadian parents could be missing out on thousands of dollars in tax credits. That’s because only 7% of those surveyed planned to take advantage of child-care-related tax credits and deductions.
Here are the tax credits and deductions to keep in mind if you are a parent:
- Child-care expense deduction:You can claim this if you hire caregivers or enrol your children in day/overnight camps, nursery schools and centres, educational institutions that provide childcare services, and boarding schools (the amount you can deduct annually is $8,000 for each child under the age of 6 and $5,000 for each child between 7 and 16)
- Canada child benefit (CCB):This is a tax-free monthly payment made to families/single parents who are eligible to help with the cost of raising children under the age of 18 (benefits are paid over a 12-month period from July of one year to June of the next year and are recalculated every July based on information from your income tax and benefit return from the previous year)
- Child disability benefit (CDB):This benefit is for families who care for a child under the age of 18 who has a severe or prolonged impairment in physical or mental function (for the period of July 2016 to June 2018, the CDB provides up to $2,730 per year/$227.50 per month for each child who is eligible)
Be sure to visit the CRA’s website for full details on any of the above tax credits.
As an education member, there are also tax credits to keep in mind that are very specific to you depending on whether you are currently working or retired.
Eligible educator school-supply tax credit.
Eligible teachers and early childhood educators can claim 15% of up to $1,000 in eligible school supply expenses up to a maximum tax credit of $150 a year. If you’ve already filed your tax return but forgot to claim this credit, you can bank it for subsequent years (i.e. you can claim it next year on 2018’s return and get back up to $300 if you spent the maximum $1,000 both years).
In order to be eligible for this credit:
- You must be a teacher or early childhood educator employed at an elementary or secondary school or a regulated child care facility and have a teacher’s certificate that is valid in the province or territory where you are employed(or must have a certificate or diploma in early childhood education that is recognized in the province or territory where you are employed)
- Supplies must be purchased within the taxation year(s)you are claiming and used in a school or in a regulated child care facility for teaching or helping students learn—and must not already be reimbursable by your school/board and not subject to an allowance or other form of assistance (unless the reimbursement, allowance, or assistance is included in your income and not deductible)
Pension buybacks (OTPP).
If you bought back a leave during the same tax year in which you began collecting a pension, only payments made from your personal funds (i.e. by cheque or online banking) are tax deductible. Keep in mind that you cannot carry forward non-deducted amounts to the following tax year (payments can only be deducted in the tax year in which they were made).
Receiving OTPP benefits? Click here for more educator-specific tips when it comes to filing your taxes in retirement.
Pension income splitting.
Your pension is perhaps one of the greatest benefits of choosing a career in education and pension income splitting is one of the ways to keep more of your pension income in retirement.
How pension income-splitting works:
- If you’re the higher pension-earning spouse collecting OTPP for example, you can transfer up to half of your eligible pension income to your lower-earning spouse (not literally but for tax purposes)
- This means you would pay less tax overall, since you would have less pension income taxed in the top tax bracket
- If you and/or your spouse are receiving Registered Retirement Income Fund (RRIF) payments, pension income splitting could also potentially reduce the impact of Old Age Security (OAS) clawbacks
- Keep in mind that neither Canadian Pension Plan (CPP) nor OAS payments qualify for pension income splitting
To ensure that pension income splitting is right for you, be sure to consult with a tax professional.
Bonus tax tips:
- If you sold your home in 2017: make sure to designate it as your principal residence when you file your tax return—forgetting this step could mean the principal residence exemption gets denied and the capital gain from the sale would be taxed as income
- If you haven’t claimed the charitable donations tax credit after 2007: any cash donations made after March 20, 2013 (including donations made in 2017) are eligible for the first-time donor super credit—which means an additional 25% credit on your first $1,000 of donations
- If you have a balance due, avoid extra fees by filing on time: filing penalties on any amount owing is calculated as 5% of your balance due plus 1% per month for a maximum of 12 months
Have a tax refund coming your way? Let us help you put it to good use.
From pay grids to pension plans, Educators Financial Group understands how your pay structure works during your working years and in retirement. Which means we can provide you with the right strategy to make that refund work harder—so you can achieve your financial goals, faster.
Plus be sure to check out 4 ways to put your tax refund to better use.
The information provided is general in nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering of tax, legal, accounting or professional advice. Please ensure to consult your accountant and/or legal advisor for specific advice related to your circumstances. Educators Financial Group will not be held responsible or liable for any losses, costs, damages or expenses incurred by reason of reliance as a result of the aforementioned information. The information presented was obtained from sources that are believed to be reliable. However, Educators Financial Group cannot guarantee their completeness or accuracy.