Top 10 ways to reduce your tax bill
Did you know?
There are a number of ways to reduce the amount of tax you owe and keep more money in your pocket at tax time. The Canada Revenue Agency (CRA) can help you learn more about the various credits and deductions that you may be entitled to and that can save you money when you file your 2011 income tax and benefit return.
1. Plan ahead – Register for My Account, gather your receipts and NETFILE access code, and sign up for direct deposit before April 30. Submitting your income tax and benefit return before the tax-filing deadline means you can avoid having to pay late-filing penalties.
2. Families – Save those receipts! All the activities you have been paying for throughout the year (piano, karate, tutoring, hockey, and more) may save you money at tax time.
3. Tax-free savings account – A tax-free savings account (TFSA) is one great way to save money since you don’t pay tax on any income you earn from investments in your TFSA.
4. Registered retirement savings plan – Any income that you earn in a registered retirement savings plan (RRSP) is exempt from tax, as long as the funds stay in the plan. RRSPs help you save for your retirement and give you a break at tax time too.
5. Public transit tax credit – If you or someone in your family is a regular user of public transit, then you may be able to claim a non-refundable tax credit based on the cost of eligible transit passes.
6. Pension income splitting – If you receive income from a pension, you can split up to 50% of eligible pension income with your spouse or common-law partner to reduce the taxes that you pay.
7. Students – Are you still in school? Students can claim the tuition, education, and textbook amounts. Have you graduated recently? You may be eligible to claim the interest that you paid on your student loans.
8. Child care expenses – If you have children, you may be able to claim child care expenses that you or your spouse or common-law partner paid so that either of you could work, do research, or go to school.
9. Home buyer’s tax credit – If you’re a first-time home buyer you may be eligible to claim $5,000 on the purchase of your new home, which can save you up to $750.
For people who are self-employed:
10. Hiring an apprentice – Did your business employ an apprentice? A salary paid to an employee registered in a prescribed trade in the first two years of his or her apprenticeship contract qualifies for a non-refundable tax credit for the employer.