Money & Career

How to save on your taxes

Stop the taxman from taking all your hard–earned dollars

RRSPs rule

Socking money away into these funds is so important that many accountants recommend borrowing money to maximize your contributions. “This is a good option if the funds in the RRSP are earning a better rate of return than the cost of borrowing,” says Jennifer Fisher, a chartered accountant in Kingston, Ont. But, she warns, if you’re trying to pay off a handful of maxed–out credit cards, “it would be prudent to pay that debt down before incurring new debt for contributions.” According to the Canada Revenue Agency, you can contribute 18 percent of your income up to a maximum of $19,000 for 2007. To make contributing easy, arrange for your deductions to come right off your paycheque instead of scrambling for a wad of cash in February.

Medical miracle

According to Fisher, not claiming medical expenses is the number–one tax break most of us don’t take advantage of. “There are many types of allowable medical expenses that can result in a significant claim. The flexibility to use any 12–month period ending in the year also allows for a larger claim in some cases.” And you can claim any expenses that weren’t eligible under or paid out by your company’s benefit plan, providing you have a prescription. Say, for instance, your plan covers $500 of physical therapy, but you spent $2,000 in treatments. You can deduct the remaining $1,500. Plus, all the fees you paid into health and dental premiums last year may be claimed. Some often–overlooked potential deductibles include laser eye surgery, hearing aids, gluten–free products (for sufferers of celiac disease) and orthopaedic shoes.

Commuting pays

Next time you’re standing on a busy train during rush hour with your face in someone’s armpit, remember that at least you can claim your monthly public–transit pass on your tax return. Keep your receipt when you buy a monthly (or longer–duration) pass for subways, buses, streetcars, commuter trains and even local ferries, and you can deduct the cost of your commute and receive 15.5 percent back.

Family matters

Submitting daycare receipts isn’t the only way to save on your taxes. Fees for lunch and after–school programs and summer camps are also deductible. You can collect the Canada Child Tax Benefit for children living with you under the age of 18, though the amount you get depends on your net income. If you have a child under six, you’re eligible for the Universal Child Care Benefit, which pays you $100 per month per child regardless of your income. University and college students can claim tuition fees, or, if they don’t need to reduce their taxes, tuition fees can be transferred to and claimed by you, up to $5,000 per year per parent. And the new Children’s Fitness Tax Credit allows parents to claim up to $500 per year of money spent on sports or fitness programs for kids under 16. (Unfortunately, the cost of the equipment is not eligible for deduction.) If you are providing in–home care to ageing parents or grandparents over 65, or other sick or dependent relatives 18 and older, you may be eligible for the Caregiver Tax Credit.