Personal Investor: 3 ways to make tax season a family affair
Some taxpayers will go to the ends of the Earth to save a few bucks when the best tax breaks are right at the dinner table.
As the April 30 personal income tax filing deadline draws near, it’s important to know that including family members in your tax strategy can significantly lower an overall household income tax bill.
Vancouver-based BlueShore Financial suggests three ways to save money by making tax planning a family affair.
1. Share non-refundable tax credits: The federal government has recently eliminated tax credits such as the children’s fitness credit, the children’s arts credit, and education and textbook credits. That makes it even more important to use the credits that do exist wisely. However, the trouble with non-refundable tax credits is that unused credits become worthless. Fortunately, certain excess credits can be transferred to other family members, such as claiming age amount, pension income amount, disability amount, tuition amount and spouse or common-law partner amount.
2. Pool expenses: Some expenses can be combined and claimed by you or your spouse to generate greater tax savings, such as the charitable donations tax credit and the medical expenses tax credit. It’s also easy to overlook how some provincial credits can piggyback on federal ones, including the age amount medical expenses credit and tuition amount.
3. Equalize income between spouses: When you balance you and your spouse’s incomes, it can reduce the collective tax bill and make it less likely income-tested tax credits and government entitlements like Old Age Security (OAS) get reduced. Sharing pension income, contributing to a spousal RRSP, helping to grow your partner’s TFSA, claiming your spouse’s dividend income and having the higher-income spouse pay expenses are all tax-friendly strategies.