By Nadia Ali
It’s that time of the year again, when we start collecting all paperwork in preparation for filing our taxes. The tax deadline is April 30, but families start the prep work by the start of the year. Whether you are a new immigrant or a family trying to make sense of all tax ‘speak’, here are the most common tax credits that all families would be coming across when they file their taxes.
In layman’s terms, a tax credit is the amount of money you can use to lower the tax you owe to the government in a given year. For example, you are working and the total tax deducted from your income equaled $5000 during 2014. When you calculate your tax credits for 2014, these amount to $1500. The government will refund this $1500 to you when you file the taxes and claim these tax credits. Even if you are currently unemployed and therefore not paying taxes, your tax credits can be claimed by your spouse to obtain the refund by offsetting against their taxes.
At the time of filing taxes, accurately calculating all tax credits you are entitled to will help to get a nice, hefty check for the refund. Even if you get your taxes filed by a professional, it’s wise to be aware of these common tax credits to make sure your accountant does not miss out any. And more importantly, to save all receipts of these expenditures to submit to your accountant at the time of filing taxes.
Children’s fitness and art activities
This year you can claim a maximum of $ 1000 related to children’s fitness expenses. If you paid $ 800 for summer camp and swimming lessons, keep all these receipts, as you can claim the whole amount as a tax credit. Another $ 500 can be applied to any art classes your children may have enrolled in. When enrolling children in arts, music or other activities, please don’t forget to ask whether the program qualifies for either fitness or arts tax credits. The great news is that you can claim both the children’s fitness amount and the children’s arts tax credit for the same child for eligible programs.
Childcare expenses deduction
If both spouses are working/studying and avail childcare, the amount of childcare you paid to the nanny, nursery school, babysitter, or an after-school program can be claimed as tax deduction. Childcare expenses can be claimed up to a maximum of $8,000 per child under age seven, and $5,000 per child age seven to 16.
Allowable child care expenses are those paid to enable the parent to earn employment income, carry on a business, attend an eligible program at a designated educational institution for at least three consecutive weeks, or carry on research or similar work for which a grant has been received.
Fees for day camps and day sports schools, private schools (the portion of tuition costs relating to child care services), boarding schools, and overnight sports schools and camps can all be claimed as childcare expenses.
Even if you utilize services of a home-based babysitter, ask them to give you receipts for the payments you make to them. More importantly, if a relative is helping you take care of your children while you work, and you are paying them, you can even claim these payments under childcare expenses.
If you have parents or parents-in-law living with you who suffer from a disability or illness, you could be eligible to claim tax credits for each parent. The caveat in this situation is that they should be residing with you at the same address and not living separately. The parent or grandparent must at the time have been a resident of Canada, and the tax credit is not available if they were just visiting you.
The public transit pass tax credit is available for the cost of passes for commuting on buses, streetcars, subways, trains for e.g. MiWay, GO, Presto, TTC, etc. Taxpayers can also claim the transit pass tax credit on behalf of a spouse, and children under age 19. So, do keep those transit passes safe; or if the pass does not provide important information such as date of validity and amount paid, you should also retain dated receipts or credit card statements to support the tax credit claim.
Generally, all eligible medical expenses can be claimed, even if they were incurred outside of Canada. When medical expenses are reimbursed by an insurance plan, only the portion not reimbursed can be claimed.
There is a long list of eligible medical expenses, including:
- payments to medical practitioners, dentists or nurses, or to public or licensed private hospitals in respect of medical or dental services;
- additional costs related to the purchase of non-gluten food products;
- expenses paid for training courses for a tax payer or a related person in respect of the care of a person with a mental or physical impairment, who lives with or is a dependant of the taxpayer;
- cost of purchased or leased products, equipment or devices that provide relief, assistance or treatment for any illness;
- remuneration for tutoring persons with learning disabilities, or other mental impairments, if the need for such services is certified by a medical practitioner.
There are also some exclusions from medical expenses that can be claimed. For example, non-prescription birth control devices, drugs and medications that you can purchase without a prescription like multi-vitamins, funeral and burial costs, and gym memberships, to name a few. You cannot claim medical expenses for which you are reimbursed by your employer or are entitled to be reimbursed. Amounts paid for purely cosmetic procedures are not eligible for the medical expense tax credit.
Hopefully your tax filing experience will be easier this year.
About the author:
Proud mom to a six year old boy, Nadia Ali has earlier worked with Ernst & Young as an auditor. She is now a tax professional at H&R Block and is looking forward to another busy tax season.