It’s hard to believe that another tax season will soon be upon us. Wouldn’t it be great if you were ready to do your taxes before the deadline of April 30th? I’m sure your tax preparer would be delighted to get everything ready and organized before then. Now is the time to be thinking about your income, deductions, and whether or not you’ll be owing come April 30th.
What is your income this year? Just from T4s then you probably won’t be owing. However, add in other income from things such as interest, investments, rental or small business and you will probably end up owing. The amount and types of income will determine your tax owing. Most ones mentioned before are taxed at 100%; however, capital gains and dividends are taxed differently (capital gains are 50% of the gain and dividends you get a tax credit).
The amount of income you earn will determine which tax bracket you fit, and then how much tax you pay. It’s best to figure out what your income is early enough so you can estimate your tax bill and be ready to pay it by the deadline of April 30th. For small businesses, even though your return is due June 15th, the tax is due April 30th.
You can find a complete list here of all income that should be included on tax return along with the line number on the tax return.
You do not have to report certain amounts in your income, including the following:
The amount and type of deductions will also determine your balance owing. The more deductions you can come up with, legitimate ones of course, the lower your amount owing will be. The first one most people think about is RRSPs as that’s a straight deduction off your income as is support payments, union dues, company pension contributions, employment expenses, childcare expenses, moving expenses, and more. The more of these kinds of deductions the lower your taxable income. The other kind of deductions are actually tax credits and include, working income tax benefit, medical expenses, donations, political contributions, CPP and EI premiums, disability tax credit, and others.
The more deductions the better off you are tax wise, however, make sure you have all your receipts for anything you’re claiming. Canada Revenue Agency (CRA) is checking a lot of these deductions now, especially if they are large amounts. Keep your receipts by deduction and year, and you should have no issue when it comes to a review of said deduction.
There are also various provincial deductions you can claim. British Columbia has the home renovation tax credit, sales tax credit (PST), training tax credit. Ontario has the children’s activity credit, co-operative education tax credit, healthy homes renovation tax credit, to name just a few. Check with the CRA website here for a complete list of provincial credits.
What your tax bill will be come April 30th, can be somewhat estimated earlier based on your income and deductions, and isn’t it better to be prepared for that than find out on the 29th what you actually owe.
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