I love tax season, and finding out about new tax credits makes me giddy! It’s like auditing how good you are paying attention to your savings, and accounting during the year. Being an entrepreneur makes tax season a little more fun, compared to when I was working for someone else, but I have full control over all my expenses, deductions.
This is the first year that I’ve run 3 different businesses, one being a non-profit entity, so you can imagine how excited I get around this time of the year. It’s also no wonder that I jumped at the chance to come on board as an Ambassador for TurboTax Canada!
Not a fan of tax time? The good news is that being able to do your taxes yourself has become a lot easier with the use of online tools like TurboTax. You are guided step-by-step as you find all of your applicable deductions. Not only that, but you get your return in as few as eight days. I mean who doesn’t want to be able to get done with tax time in 30 minutes or so?
While I know that most people have another month or two before you really start thinking about doing your taxes, but TurboTax and I wanted to share a few key tax credits for 2014 that you need to keep in mind before you starting filing.
Family Tax Cut
Under Canada’s tax system, federal personal income tax rates increase with the level of taxable income of the individual. As a result, a couple in which one individual has a higher taxable income than the other often pays more federal income tax than a couple where both individuals have equal taxable income.
The Family Tax Cut is a new non-refundable tax credit of up to $2,000 for eligible couples with minor children. Starting in the 2014 tax year, couples in which one spouse earns more than the other can benefit from this by transferring up to $50,000 of the higher earners income to the lower earner in order for the higher earner to be taxed in a lower tax bracket.
Child Care Expenses Deduction
While this is not a new deduction, the amount that families can claim has increased by $1K starting in the 2015 tax year. You or your spouse or common-law partner may be able to claim a deduction for expenses that were incurred for someone to look after your child so that one of you could earn income, go to school, or conduct research. The expenses are deductible only if, at some time in the year, the child was under 16 years of age or had an impairment in physical or mental functions. Generally, only the spouse or common-law partner with the lower net income (even if it is zero) can claim these expenses.
The amounts that can be deducted for TY14:
- For each child who is eligible for the Disability Tax Credit, the deduction limit is $10,000;
- For each child who is under seven years of age at the end of the year, the deduction limit is $7,000; and
- For each child who is under 16 years of age or had an impairment in physical or mental functions, the deduction limit is $4,000.
Children’s Fitness Tax Credit
The amount that can be claimed for the Children’s Fitness Tax Credit starting in TY14 has doubled!
This credit allows you to claim eligible fees paid in the year up to a maximum of $1000 (up from $500) per child.
Additionally, if your child is eligible for the Disability Tax Credit and a minimum of $100 has been paid for eligible fees in the year, an extra $500 can be claimed. Eligible fees include an amount paid related to the cost of registration or membership for your or your spouse’s or common-law partner’s child in a prescribed program of physical activity. The child must have been under 16 years of age (or under 18 years of age if fitness expense was paid.
Also new: Starting in TY15 and for subsequent years, the Children’s Fitness Tax Credit will be converted to a refundable tax credit. Non-refundable tax credits reduce your federal tax; however, if the total for credits is more than your federal tax, you don’t get a refund for the difference. Refundable tax credits, on the other hand, are treated as payments of tax you made during the year. When the total of these credits is greater than the tax you owe, the CRA sends you a tax refund for the difference. So this could mean more money in your pocket!
TurboTax has you covered! If you have questions at any point in the filing process, TurboTax is available to help so you can be confident your taxes are done right. Not only that, TurboTax guarantees every return.