8 Things to Remember When Filing Personal Tax Returns in Canada
We all know that tax filing can be a tiring and complicated process. Sometimes, it can be hard to stay on top of all the tax changes. For that reason, we have compiled a list of the top ten things you need to know before you file your taxes.
1) Always File a Return
Even if you have no income or you have earned only a small amount, on which there may not be any taxes payable, you should file an income tax return. You might not owe any tax but you may be eligible for other benefits such as the goods and services tax/harmonized sales tax credit or other refunds.
2) Create a Tax-Free Savings Account
You are eligible to give your children up to $5,500 a year to put in a Tax-Free Savings Account (TFSA). This type of account is tax-free and children can withdraw from it without incurring any taxes.
3) Invest in Education
Investing in education is a good strategy. Earnings on a Registered Education Savings Plan (RESP) are exempt from tax. The federal government pays a grant into the RESP that is equivalent to 20 per cent of your annual contribution (subject to a maximum amount of $2,500), per beneficiary. These funds can be withdrawn when your child starts post-secondary education.
4) Consider Pension Income Splitting with Your Spouse
Up to 50 per cent of eligible pension income can be transferred to your spouse. Doing so allows your spouse to make use of the pension credit and can result in an overall tax saving.
5) Learn About Home Buyers’ Plan Benefits
If you are planning to buy your first home, you are entitled to withdraw funds from your RRSP account in accordance with the federal government’s Home Buyers’ Plan. You and your spouse are allowed to withdraw up to $25,000 each, tax-free, with 15 years for repaying the loan, either by direct contributions to RRSP or adding a portion to your income.
6) Claim Business Expenses
If you started your business in 2017 and you had to incur expenses associated with it, you can claim these expenses even if you have not earned any revenue in the year. This will result in business loss that can be applied against other sources of income or it can be carried forward to offset future income.
7) Know the Benefits of Filing Return Electronically
If you want to get a refund quickly, filing your return electronically will be helpful to you. This usually results in receiving a notice of assessment earlier.
8) Be Sure to Claim it All
If you have not claimed all tax credits or other deductible expenses, you have 10 years to adjust for omissions or errors.
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