Every year we search for the most effective tax breaks to ensure the highest tax return possible—or lower the taxes we owe, whatever the case may be. While filing your taxes is about as much fun as a root canal, learning a few tips and tricks can help make the experience a little less stressful.
While the custodial parent is generally allowed $3,050 per child for 2003 ($3,000 for 2002), this rule can be over-ridden. Parents can agree to allocate the exemptions—for example: allowing your ex to have the child’s exemption won’t preclude a custodial parent from claiming head of household filing status.
Small-business owners can deduct costs incurred to earn income. Be sure to maintain your financial records accurately and save all receipts. Deductible expenses for small businesses include advertising, promotion, rent, salaries, legal fees, auto expenses and accounting fees (next year you can claim the cost of this year’s claim). If your taxable sales are less than $30,000, you don’t’ have to register for GST/HST. However, it’s generally advisable because you can claim input tax credits in respect of your expenses.
If you purchased a home in 2002, you may be entitled to deduct the mortgage points paid by the seller. There is one catch, though—you have to reduce the tax basis of your new home by the amount of seller-paid points that you deduct. Also ask your tax professional about “qualified residence interest.” If you sold a house last year, you might have prepaid some of the property taxes that came due after the sale. You can deduct this amount on your return as well.
Don’t overlook charitable donations. If you’re a contributor, keep you receipts and claim them on your tax return. Many people don’t realize that charitable donation receipts are good for up to five years, so if you missed them last time, it’s not too late.
The April 15th deadline is fast approaching. Here’s our most valuable tip: Ask Questions. If you have questions about your tax return, visit the T.I.P.S. website at http://www.ccra-adrc.gc.ca/eservices ipsonline/menu-e.html or call1-800-959-8281.
This article was published in the March edition of Sophia’s Royal Report: http://www.sophiainguelph.com/