8 Tips and Tricks to Get the Most Money Back on Your Tax Return
This story was sponsored by UFile.
Every April, millions of Canadians sit down to file their taxes. And whether it’s through not properly cataloging receipts or missing out on less commonly-known deductions, many get up having left money on the table. But it doesn’t have to be this way. We spoke to Gerry Vittoratos, the resident tax expert at UFile, to get his tips on how to get the most out of your tax return, and help you save more than ever on your taxes this year.
Do Your Homework
Doing your taxes can be stressful, intimidating even, if you don’t understand the jargon being used, which is why Vittoratos strongly urges taxpayers to read up on the basics in an effort to become more “tax aware.” And the better your tax awareness, the better prepared you’ll be to tackle your return. “Taxes are arguably one of the most important components of personal finance, yet it is the most ignored,” says Vittoratos. “The CRA site is a great resource to teach you some of those basics.”
Keep Your Receipts
Getting in the habit of saving your receipts will help save you money in the long run, says Vittoratos, especially if you’re self-employed and claiming business expenses. “Too often I have seen people who don’t archive their receipts properly and miss out on expenses they could have used,” he explains. And as that old saying goes, you miss 100% of the expenses you don’t claim.
Determining Expenses
Not sure whether that round of after-work drinks counts as an expense or not? “If your gut tells you the transaction you just did might be tax deductible, there’s a good likelihood that it is,” suggests Vittoratos. When in doubt, file the receipt away just in case, and sort through your potential deductions afterwards – the CRA website has a full list of allowable expenses. “I strongly recommend that people go through this list and make sure they are claiming the full amounts that they can,” he says.
Pay It Forward
You know that letter you get from the CRA acknowledging your return? That’s your Notice of Assessment, and even though many ignore it, it’s one of the most important tax documents there is, says Vittoratos. That’s because it lists your “carryforward amounts” – unused business losses or tuition and/or donation amounts that can be banked to use to reduce your tax payable for future returns. “Unfortunately, most taxpayers are not aware that they have these amounts in their files that can be used,” he says. If you’ve misplaced your Notice, don’t worry; you can still see your carryforward amount online, by signing up to the “My Account” section of the CRA site.
Learn Your RRSPs
“For most Canadians, the simplest way to maximize their tax return is to contribute regularly to their RRSP, or their company pension plan or RPP,” explains Vittoratos. Making contributions to your RRSP or RPP allows you to reduce the amount of income you’ll be taxed on, which directly reduces the amount you’ll have to pay. It might even bring you down to a lower tax bracket, says Vittoratos. He recommends you get into the habit of contributing monthly, as opposed to waiting to make your yearly contributions all at once.
Tax Code Changes
Another common tax mistake people make? Not being aware of the changes made to the tax code from one year to the next, says Vittoratos. Every year, tax credits are being added, eliminated or reduced, and staying up to date on these changes is crucial if you want to optimize your return.
Three Reasons Not To Be A Tax Procrastinator
If you’re one of those people who waits until April 29th to start thinking about taxes, you’re definitely leaving money behind, says Vittoratos.
1. “Finding out at the last possible minute that you owe money to the CRA can be costly,” he cautions. Ending up with a surprise “amount owing” on your return can result in an unexpected blow to your budget, or worse, interest charges and/or late-filing penalties if you don’t pay up immediately.
2. You miss out on taking advantage of time-sensitive windows. “For example, you have until March 1st of the following year to contribute to your RRSP and have it count towards your previous year,” explains Vittoratos. But come April, it’s too late.
3. Tax loss selling. “The concept is simple,” says Vittoratos – if you have any investments that are losing money (but that you still want to keep), you can sell them off in December, wait 30 days, then repurchase them. “By waiting the requisite 30 days to repurchase these same investments, you create a deductible capital loss that you can use against any capital gain you incur in the current year or future years,” he explains.
Commonly Missed Deductions
The one question Vittoratos gets most often – or, well, second-most after “Where’s my refund?” – is whether a specific expense is deductible. And while most people already know about claiming charitable deductions or home office expenses, they’re not all common knowledge, he says: “Not many people realize that the CRA allows you to deduct expenses you incurred to move closer to your new workplace or university.”
The same goes for medical expenses. For instance, if you suffer from Celiac disease, you can claim the difference in price between gluten-free and non-gluten-free food. Costs that aren’t covered by healthcare – like physiotherapy or dental work – are similarly deductable. “You would be surprised what, according to the Income Tax Act, is considered an eligible medical expense,” says Vittoratos. “The list is exhaustive, and worth going through.” When it comes to maximizing your return, it pays to pay attention.
For more great tax return tips and solutions, check out UFile’s Tax & U.
