A Registered Retirement Savings Plan (RRSP) is the biggest tax break available to most Canadians. Avoid the stress of scrambling to meet the RRSP deadline by contributing earlier in the year. Contributing as early as possible, or in smaller amounts throughout the year through a pre-authorized contribution plan, allows your savings to generate more compound income. The RRSP deadline for 2017 is March 1st and you can find your limit on your previous years notice of assessment. Tax-Free Savings Account (TFSA). Make a $5,500 contribution to your investments held within a TFSA. The contribution is not tax deductible but the growth and interest earned inside your TFSA are tax-free and so are withdrawals, which can be made at any time for any purpose. Your life time maximum is $46,500 if you have never contributed and you were eligible back in 2009. Its also important to note the TFSA is not a “ savings account” it is an investment account that can hold almost any investment you want much like your RRSP account .
RESPs. If your child is turning 15 this year and you want to ensure he or she will be eligible for the Canadian Education Savings Grant (CESG) in the years he or she turns 16 and 17, by year-end you must be able to show that you contributed at least $2,000 to their investments held within an RESP (with zero withdrawals) or that you contributed at least $100 for your child in any four-year period (again, with no withdrawals).
Children's fitness and arts tax credits. The federal government announced its intention to change the child fitness tax credit from a non-refundable to a refundable credit, meaning that families who claim the program cost or registration fee for a physical activity can now receive up to $75 per child for registration or membership for your child in a prescribed program of physical activity. Its important to note that it will be eliminated in 2017. Available to children under 16 years of age or under 18 for children with a disability. The good thing about the changes to the fitness tax credit to a refundable tax credit, is it means that lower income families will still get the same benefit. So, make sure you save the receipts from summer camp, fall/winter sport registration fees, music and dance lessons, and theatre programs to realize some savings. Another big change from 2015 is the amount parents can deduct for child-care expenses, increased by $1,000 annually, per child, to $8,000 for a child under six and $5,000 for a child aged between seven and 16 years old. Many parent will already have noticed the increases to their monthly benefit.
Charitable donations. Make charitable donations by December 31 if you want those donations to be eligible for a tax credit this year. Total donations for the year of more than $200 will save you tax at approximately the top marginal tax rate. You can combine your donations with your spouses to maximize the credit. The First-Time Donor's Super Credit, introduced in the 2013 federal budget, allows first-time donors to claim a 25% credit in addition to the regular tax credit for up to $1,000 of donations. Move to save. If you are moving to a province with a lower tax rate, do so before December 31 and you'll pay the lower rate for the full year. If you're moving to a jurisdiction with a higher tax rate, try to delay until 2017. Also, certain expenses may be deductible if you move at least 40km closer to a new place of work. In the end, there are several things everyone can do to try and minimize their tax bill and for good reason when the average Canadian pays over 42% of ever dollar they make to the combined levels of governments.
Article written by O'Farrell Financial Services Inc.