This short article reveals 5 ways to save tax on my 2011 personal tax return. It’s a ‘must-read’ for anyone who wants to reduce their tax bill!
It’s really important that you go through this article because the tax return filing deadline is fast approaching, that is April 30th. By watching this video about 5 ways to save personal tax you are certainly going to save personal taxes. So, let’s get started.
Contribute to RRSP’s – 1st of 5 Ways to Save Tax on My 2011 Personal Tax Return:
The first way to save tax on your 2011 personal tax return is by contributing to your RRSP, because RRSP contributions are tax deductible. You can make an RRSP contribution right now and up until February 28th, 2012; and have that contribution count towards your 2011 tax return. That’s right, you can contribute now and up to February 28th, 2012, and receive a tax deduction for the RRSP contribution made on your 2011 tax return.
How much can you contribute to your RRSPs? Well, you need to know your RRSP contribution limit for the 2011 year. You can find that on your 2010 ‘Notice of Assessment’ or by calling the Canada Revenue Agency (CRA) at 1800-959-8281. For those of you in the highest income tax bracket, your 2011 RRSP contribution limit is capped off at $22,450. You cannot contribute more than that.
Write-off Employment Expenses:
The second of the 5 ways to save tax on your 2011 personal tax return is by deducting employment expenses. To claim employment expenses you must first complete form T-2200 called ‘The Declaration of Conditions of Employment’. Where can you get this form? Well, you can download it from the CRA’s website. You must have your employer sign this form.
The two most common types of employment expenses that you can write-off are home-office expenses (if you work from home) and automobile expenses (if you are required your use your car for work). What’s included in auto expenses? Well this includes gas, insurance, repairs, and lease payments or tax depreciation if you own your vehicle. Parking expenses are also allowed.
How about home office expenses? Well, if you work from home you can deduct a portion of your mortgage interest, property taxes, home insurance, and utilities including gas, hydro, and water. If you own a condo and pay condo fees you can deduct that as well.
Deduct Interest Paid:
The third way to save tax on your 2011 personal tax return is by deducting interest paid. Interest paid on investment loans can be deducted on your tax return. Investment loans are money borrowed to purchase assets that earn rents, interest, dividends, royalties, etc. You can also claim a tax credit for interest paid on student loans.
Donation Tax Credit:
The fourth of the 5 ways to save personal tax in 2012 is by claiming the donation tax credit. You receive a tax credit of 15% of the first $200 of donations made and 29% for donations made over $200. You have to look at the tally of all of the individual donations when determining the credit rate to apply. It’s a wise idea, if your are married, to claim all of the donations on one spouse’s tax return so you can take advantage of the higher 29% donation tax credit rate.
The fifth way to save tax on your 2011 personal tax return is by income splitting with your spouse. What is income splitting? Income splitting means taking a source of income and sub-dividing it between both spouses to reduce the taxable income of both spouses. That will, therefore, result in a lower taxable income for each spouse than if one of the spouses included all of the income on his/her tax return.
The most common form of income splitting is to split investment income shown on your T5 or T3 slips that you receive in respect of your non-registered investments, such as mutual funds. Not only do you have to make sure that the names of both spouses are on the tax slips, each spouse should have equally contributed to purchasing the investments. So, if only one spouse bought the investments and the other contributed nothing, then you cannot sub-divide that income.
I hope you’ve found this write up about 5 ways to save tax on my 2011 personal tax return useful and do not hesitate to ask me any question in regards to the same (you can do that right here by posting a comment).
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.