Financial: Kathy's Tax Tips

Kathy’s Tax Tips for 2006

Here are a few tax saving ideas that you shouldn’t miss out on:

If you received a taxable disability payment this year, you may be able to deduct all the premiums you paid into the plan since you started contributing to the plan.

Canada and Quebec Pension Plan

Averaging the tax on lump sum CPP benefits received. Reporting a death benefit on a separate trust return and pay less tax than on your personal return.

Interest and other investment income

Income splitting with your partner and children. Deducting your safe deposit box fees. Deducting accounting fees paid to calculate the investment income reported on your tax return.

Taxable capital gains

Reduce any capital gains by any capital losses incurred in the year. If you still have a capital gain at this point, claim any capital losses from previous years not otherwise deducted. If you have an overall capital loss for the year, consider deducting these losses from any capital gains reported on your prior three year's income tax return or carry them forward until used.

Registered retirement savings plan

Consider making your RRSP contributions now, but save claiming the deduction for when you are in a higher tax bracket. Consider making spousal RRSP contributions.
If your income will be nil or significantly less next year, buy an RRSP before March 1st., and cash it in one day later. The contribution will be deductible this year at your marginal tax rate and taxable next year at your new marginal tax rate.

Non capital losses of other years

Contact the Canada Revenue Agency and ask for a printout of your carry forward items. You might have a loss from a prior year that you forgot to claim.

Pension income amount

If you do not need this deduction, transfer the unused amount to your spouse. Basically the first $1,000 of periodic pension plan is tax free for you and your spouse.

Caregiver amount

This credit is fairly new and you may not know if you qualify. You qualify if you are the caregiver of a relative who lived with you, who is over 18 and dependent on you because of an infirmity. Their income must be less than a qualifying amount.

Disability amount

This deduction is transferable to your spouse if you don't need it to reduce your net income to zero. Canada Revenue Agency is a stickler on this one, so be sure your form T2201 is filled out correctly by your physician. Check this deduction out if you or your spouse are "markedly restricted" in your daily living activities such as walking, talking, seeing, or mental function.

Submitted by Kathy Côté, Taxes on Wheels.
Phone: 905.385.0306
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