Now is the time to prepare for next year’s taxes. Experts say the biggest challenge for most people – not only seniors – is that they think about taxes in the 11th hour, which means it may be too late to impact their income tax return. So give yourself time to make any changes and the process will be easier. And if you’re getting a refund, file early – those overpaid taxes belong to you and the government doesn’t pay interest.
Get organized now
Caroline Battista, senior tax analyst at HR Block, is organized. Starting Jan. 1, she keeps everything in a drawer by the front door – for the following year’s tax time.
“It’s so important to get organized early and keep everything in one spot, from income statements to charitable tax donations to medical receipts,” she says.
Meanwhile Cleo Hamel, senior tax specialist at American Expat Taxes, advises you sign up online with Canada Revenue Agency for T4 OAS and T4 AP slips.
“These forms are available now – don’t wait for mail delivery. And look through your cheque book to see who you gave to this year. Make sure you have corresponding receipts for charitable donations and if not, ask for them now.”
Income
Do a quick calculation of your current year’s earnings. You need to be careful that your income doesn’t go over a certain amount or you may lose your Old Age Security (OAS) pension. If your income exceeds $72, 809, you potentially could lose part, or even all, of your OAS.
“While reviewing last year’s tax return, look at what you claimed,” says Hamel. “What has changed? Maybe you sold an investment. If you plan on taking money out of your RRSP, see if that withdrawal will impact you.”
Hopefully you bought that RRSP to lower your taxes when you retire so make it count and plan ahead.
Medical Expenses
You can claim medical expenses that aren’t reimbursed if they exceed three percent of net income. For instance, you can claim hearing aid batteries, bathroom aids, book page-turning devices and even air conditioning. And pharmacies can give you a print-out of the year’s prescriptions (with a prescription).
Pension Income
Credit Splitting
If you are married or have a common-law partner, you can transfer up to 50 per cent of your pension income to your lower-income spouse. It’s a great way to decrease the overall tax your family pays, but Battista says income splitting is not always optimal.
“Say your wife is in a nursing home and nursing home fees are based on your tax return,” explains Battista. “You income split 50 per cent, which bumps up her income level so you end up paying much more for the nursing home that year.”
As well, check to see if you’re eligible for the disability tax credit.
Battista points out seniors often don’t know the kinds of pension income that can be split. “CPP cannot be split at the tax desk, unless you arranged to have it split when you first applied for your CPP.”
Be aware of how to use your credits. Did you know that public transit passes, medical expenses and donations are all credits and they can also be combined?
“If you are married, it is generally best to combine credits. Medical expenses especially should be claimed on the lower income spouse’s return,” Battista explains.
janevm@telus.net
