Tax season is almost here and with it comes a number of opportunities to maximize your tax savings. We’ve prepared a brief primer on tax credits; but remember our team is here to help you navigate these and other tax-related issues to keep the most money possible in your pocket.
What is a Tax Credit?
There is often some confusion about the difference between a tax deduction and a tax credit. The basic difference: a tax deduction reduces your taxable income, whereas a tax credit is a deduction from tax owing.
Common tax credits include the following, amongst others:
- Basic personal amount – We all get this tax credit and for 2014 it amounts to $11,138
- Spousal amount – You can claim your spouse’s basic personal amount or a portion thereof if you have a spouse earning minimal income
- Equivalent to spouse – If you are a single parent and have a dependent residing with you, you could claim this credit as an alternative to the spousal amount
- Age Credit – Age amount applies to 65 years of age or older and amounts to a maximum of $6,916 for 2014
- Public transit
- Children’s fitness and arts credits
- Home buyers’ amounts
- Adoption expenses
- Caregiver credit
- Disability tax credit
- Interest on student loans
- Tuition expenses or the transfer of children’s tuition credits
- Medical expenses
All of the above tax credits are then totalled on your tax return and multiplied by 15% and that figure is used to reduce your total federal income taxes payable.
Are Donations a Tax Credit?
Donations also result in a tax credit, but at 15% for the first $200 and then an enriched 29% thereafter. There is also a first-time donor’s super credit of 25% on the first $500 of donations.
How do I know which Tax Credits I am eligible for?
As you can see, with all of the above credits, it is important to ensure your accountant is up to date on all of your individual circumstances. A change in marital status, the birth of a child, medical circumstances, caring for all loved one; all of these events can impact your personal tax credits.
At our office, we encourage all of our clients to complete our annual questionnaire that covers topics that could impact the tax credits claimed on your tax filing. This communication is imperative to make sure you are getting all of the tax credits you are entitled to.