Money Tips

Cleo Hamel H & R Block www.hrbtaxtalk.ca cleo.hamel@hrblock.ca (403) 25-4-86

Make the most of the 2010 tax season

·         Review your stock portfolio. The markets did gain some ground in 2010 but many people are still facing capital losses on their investments from previous years. It is a smart strategy to review your portfolio before the year end to see if you can find a tax advantage in taking a loss or cashing in a gain. Capital losses can be carried back three years or carried forward indefinitely.

·         Taxable income:  If you have cashed in some of your RRSP, sold an investment property or received a lump sum pay out from an employer, you may want to do a rough calculation of your taxable income. All of these elements can impact your tax payable and you may be facing a tax bill. There may be ways to reduce your bill but you will be limited after December 31.

• Employment Insurance (EI) Benefits: EI claims may have gone down in 2010 but taxpayers collecting EI may want to review their tax obligations before the end of the year. In most cases, EI only withholds 10 per cent back for tax purposes which is less than the lowest tax bracket. If the taxpayer collecting EI earned any other income in 2010, they could be facing a tax bill when they prepare their return.

·         Pooling medical expenses: If you have an expensive trip to the dentist coming up, you may want to consult a calendar. Medical expenses can be claimed in any 12-month period ending in 2010 so it could be beneficial to try to fit known medical expenses into the same 12-month period in order to maximize your claim. You don’t actually have to go to the dentist but if you have an outstanding amount, try to pay the bill by the end of the year. Remember, medical expenses are reduced by a percentage of your income. So the greater their dollar value, the likelier it will be that you can make a claim.

·         Home Renovations:  You may have receipts from early 2010 that are eligible to claim on the Home Renovation Tax Credit but you cannot claim them on your 2010 tax return. The HRTC was only available to be claimed last year. If you have eligible receipts, you will need to file an adjustment to your 2009 tax return.

·         Get organized: Trying to find all your slips the day before the tax deadline is never a good thing. If you haven’t already, start an envelope or folder to hold all your tax slips and receipts. You can still procrastinate until the last day but at least all your slips will be together.

·         Save for Higher Education: With tuition costs rising, many parents and grandparents want to take advantage of the government’s Canada Education Savings Grant (CESG). You must make a contribution to your child’s Registered Education Savings Plan (RESP) before December 31. The lifetime RESP contribution limit is $50,000 with no annual contribution limit. CESG matching contribution per year is up to $500.

·         Making a difference: If you want to claim a charitable donation on your 2010 tax return, you have to make it before December 31. If you have already made more than $200 in donations in 2010 it will also be worth a 29 percent federal credit instead of the 15 percent for donations under $200. The good news is that now you can donate publicly-listed securities to registered charities or private foundations without being subject to capital gain taxes.

·         Moving to start a job in a different province? Check the provincial tax rates before deciding the moving day. You are subject to provincial tax in the province where you reside on December 31. So if there is a substantial difference in the tax rates, you may want to either speed up or defer the move.

·         Getting married? You file your taxes based on your marital status on December 31. So if you want to claim your new spouse as a dependent on your 2010 return, you can claim them for the full year even if you are married on New Year’s Eve. Just make sure you say your vows before midnight.