Income Tax Deadline
With the income tax deadline just around the corner for the tax year 2017, which is April 30, 2018, it’s time to start gathering what’s required to file. If you are a small business owner, you have until June 15th to file, but any taxes owing must be paid by April 30th. If you are entitled to a tax refund, although the deadline is at the end of April, the sooner you file, the sooner you get your tax refund.
When preparing to file, there is paperwork required to be collected for information purposes, or even to be submitted to CRA. For me, I use a filing cabinet and separate receipts and other paperwork by category, then use a spreadsheet to summarize everything. I typically organize the spreadsheet by income, claimable expenses, small business, rental properties well before the income tax deadline. This article will focus on preparing to file personal taxes but here’s another explaining small business and rental properties taxation.
The first step in organizing your taxes is adding up all taxable income for the year.
- T4 – These are all sources of “other income” such as salary income, employment insurance, pension etc. The T4 slip will be provided by your employer/government.
- T5 – This slip usually comes in the mail from your investment brokerage and covers your dividend and interest income.
- Capital Gains/Losses – This will need to be tracked yourself and is a result of buying/selling investments within a non-registered account (or real estate). Here is an article on how capital gains tax works. As well, if you buy and sell the same security multiple times, here is how to calculate the adjusted cost base.
- RRSP Contributions – The RRSP contribution slip(s) that you’ll receive from your bank/brokerage is important as they may need to be submitted to CRA with your return. RRSP contributions are perhaps the largest tax deduction/deferral available for salaried workers.
- Charitable Donations – Usually when you make an online donation you’ll get an email tax receipt shortly afterward. If you are a monthly contributor, then they’ll most likely send you a large donation receipt at the end of the year. Note that if you paper file, you’ll need to include donation receipts with your return. Here is more info on how the donation tax credit works.
- Medical Expenses – For 2017 tax year, you’ll get the 15% tax credit for qualified medical expenses in excess of $2,268 or 3% of net income (lower income spouse) whichever is less. Note that health insurance premiums paid by an employee can be counted as a medical expense. For example, if the lowest income spouse makes $40k net (ie. after deductions) income per year, then medical expenses in excess of $1,200 ($40k * 3%) will receive the tax credit.
- First Time Home Buyer Tax Credit – This is a tax credit that was introduced in 2009 for new home buyers. New home buyers are given a non-refundable tax credit on the first $5,000 in expenses related to purchasing the home ($750 value). More details here.
- Education Expenses – If you had education expenses such as tuition, then you may be eligible for the tuition tax credit. As well, student loan interest might be applicable.
- Child Care Expenses – If you have children, there are a few child care tax deductions available. If you have a spouse who stays at home, a spousal amount is transferable to the higher income partner, daycare expenses (up to $8,000 per child age 6 or less, $5,000 age 7 to 16).
- Investment Loan – For those of you who have the risk tolerance to leverage your investments, then providing that the funds were used for eligible investments, you will be able to claim the interest on the loan. Here are some key considerations with an investment loan.
- Transit Pass Tax Credit – This tax credit is eliminated for transit costs after June 2017. For those of you who use the public transit system, you may be eligible to claim your transit expenses as a tax credit. For example, if you paid $100 in transit expenses before June 2017, you would receive a tax credit of $15. I’ve never claimed this one (public transit where I live isn’t ideal), so make sure to do your own due diligence. More detailed info here.
After preparing all your paperwork prior to the income tax deadline, there are a few options. You can DIY via tax paid online software like TurboTax, or free via Studiotax or Simple Tax (thumbs up!). Other options include doing an old-school paper return or using an accountant.
Even if you have an accountant, you’ll save them time, therefore save you money if you have everything organized before submitting to them. Personally, I think that if it’s a fairly simple return with a regular salary and perhaps some investment income, then an online program would be just fine. However, as the tax situation gets more complicated (your own business etc), then it may warrant paying for professional advice.
Note that I’m not an accountant so this article should be used for informational purposes only.