Spring is coming soon and although we are looking forward to the snow melting and the sun coming back, no one is eagerly anticipating tax season. This time of year can be a headache for Canadian families, especially when it comes to filing a complicated tax return. However, if you know what you are doing you might be able to save a lot of money on your taxes this year.
In fact, as a family you will be able to save more on your taxes than you would if you were a single person. With the many deductions available to you, it is possible to save more money this year and make a plan for the future of your family.
What is a Tax Exemption?
Tax exemptions are an amount of money that you will be able to minus from your Adjusted Gross Income because you have young dependents. This will reduce the amount of income on which you and your spouse will be taxed.
For example, in the tax year 2013 you will be able to claim a $3,900 tax exemption for each qualifying child – which includes foster children, step children, children or even grandchildren. The child must live with you more than half of the year and must be under the age of 19 – or under 24 and a full time student. In order to claim this exemption, the child can still have an income, as long as they don’t provide more than half of their own support.
Also, you and your spouse are each entitled to an exemption personally, to the same amount of $3,900 each. By deducting this amount from your income, you not need to pay income tax on these earnings.
Claim Your Birth Related Medical Costs
Have you just had a baby in the last year? It is possible to claim any medical costs that were associated with the birth of your child, including the cost of your hospital room and the pre-natal care you received from a nurse. This can be a helpful relief, especially because finances are usually tight when you have a new baby anyway.
Save Money on Your Tax Software
Many Canadians use computer tax software to figure out their expenses, such as Turbo Tax or H&R Block. These programs can make filling out a tax return so much easier and can save you a lot of time and hassle. However, purchasing the program does cost money. If you want to save on your taxes this year by getting a discount on tax software, you can find coupons online.
Other Tax Benefits for Children
There are many tax exemptions and benefits designed to help families, so make sure you do your research into them and claim everything that you can.
Did you know that you can claim up to $500 annually in fitness and sport activity fees for your child, as long as they are under the age of 16? This includes any program that lasts at least eight weeks and is a weekly activity or a day camp that runs for five consecutive days. Also, you can claim up to $500 annually for any artistic, cultural or developmental activity – including drama classes, art camps, academic tutoring and even Girl Guide or Scout Programs. You can also claim for public transit passes that were used by your children under the age of 19. Also, get a statement from your pharmacist and your dentist, to see if you have enough medical expenses to qualify for a tax credit.
File a Tax Return for Your Child
Here’s another way that you can save money when filing your taxes as a family – also file a return for your child. Even if they are a teenager who makes a small amount of income from babysitting, this will allow you to claim deductions and credits on their behalf that will be carried forward indefinitely. This will provide you and them with tax savings in the future when their earnings are high enough. In fact, depending on which provide you live in; you will enjoy cash refunds from the GST credit for children 16 and over.
These are just a few tips that you can use to save money on your taxes this year, so you don’t have to dread tax season so much!