This time I will discuss a few specific items to watch when doing your tax returns.
1. Pension Income Credit. For some time the federal government has provided a federal tax credit of 15% up to a maximum of $2,000 and the provincial government have provided a similar credit in Manitoba (similar to most provinces) of $1,000. Ontario and Alberta have calculated the credit indexed on the base of $1,000 and currently are at $1,300 and $1,331 respectively. Pensions that can be used are superannuation or registered pension funds as well as RRSPs, DPSPS or RRIFs, the latter three where the pensioner is at least 65 years of age or as a consequence of the death of a spouse plus many foreign pensions.
At one time we used to encourage clients to try and ensure contributions were made to a spousal RRSP partly to take advantage of this credit for both spouses. There still remain reasons to continue making spousal contributions but couples can now avail themselves of the Joint Election to Split Pension Income and avail themselves of this deduction for both persons. At the very least this election allows couples to both use the pension income deduction and take advantage of savings of approximately $400 per person.
2. Donations. This claim has been around for some time. It is necessary to have donation receipts with the charities business number and it must be an approved charity by Canada Revenue. The first $200 is only eligible for a deduction at the minimum tax rate, but any amount over the $200 per year receives a tax credit at the highest tax rate regardless of the taxable income of the taxpayer. Donation receipts should be combined for spouses, so they don’t have to meet the $200 threshold twice and, as donation receipts can be carried forward five years, you may wish delay claiming the donation for some years to limit the effect of claiming the $200 threshold. For example, if you make donations of $200/year, and hold claim for five years you will only be deducted the $200 once. You still must enter the annual donation each year but indicate it is to be carried forward.
Charitable donations do have a “be very careful side” to them. This is best summed up as if it sounds too good to be true, it probably is. It seems someone always tries to take advantage and charities have been victims. If the receipt is going to be for more than your contribution or for artwork to name a couple of possible concerns, check with your accountant to make sure the scheme is on the up and up.
3. Disability Amount. If you have a severe and prolonged impairment in physical or mental functions, and meet certain conditions, you may be eligible to claim the disability amount of Federally $7,546 and Provincially for example Manitoba $6,180 and Alberta $13,331. Once again, you should be careful. There are people who have tried to take advantage of this claim and may charge you a considerable amount for the inconvenience. Your doctor or other appropriate professional should complete the diagnosis and I suggest you have a trusted accountant send it in to Canada Revenue for you. As well, be familiar with the requirements as ultimately you are responsible for the claim which you have claimed.
4. Medical Expenses – You may be able to claim a non-refundable tax credit based on the cost of previously unclaimed medical expenses for any 12-month period ending in 2012. Most people use the calendar, however if, for example you have a no bills in January 2012 and large bills in December 2012 and January 2013, you may wish to make a claim next year for the period February 1,2012 to January 31, 2013. The deduction is the lessor of 3% of your net income and $2,109 with varying limits for the provinces e.g. Manitoba $1,728 and Alberta $2,233. Included are most medical fees and expenditures including prescription glasses, drugs, chiropractic, attendant care, hospital, wheelchair, hearing aids, health insurance payments, etc. Only those expenditures approved by your Provincial government plan can be claimed. Acupuncture, for example, can only be claimed in some provinces. Receipts are required and cancelled cheques or credit card vouchers are not adequate support for a claim. Any amounts reimbursed by an insurance plan cannot be claimed.
Terry Robert B.A., C.M.A., C.G.A.
R. T. Robert Certified General Accountant
Please note that this column deals with details and circumstances in a general way and comments are meant solely as a guide. For your protection, a professional accountant is recommended and should be consulted before making any decisions regarding anything discussed in this column.