Now that the weather is improving, it can only mean four things: (1) the NHL playoffs are just around the corner, (2) the Blue Jays home opener is nearly upon us, (3) the Masters golf tournament is nearly here, and (4) your tax return is due pretty soon. As I sat down on the couch the other day, preparing to watch the sports highlights, I said to my wife: "Carolyn, I'm going to be a little pre-occupied these next four weeks. Is there anything you'd like to say to me before the hockey playoffs begin?"
"Yes, Tim," she replied. "I want you to speak with Jack next door. He's been pulling his hair out trying to understand his taxes." Now, if you know Jack, you'll know that he has precious little hair left, so this was not good news. I sat down with Jack on the weekend and we talked about all that's new this year when it comes to filing his tax return. You won't want to miss these changes as you pull out your own tax forms (not your hair). Here's the low-down on changes that may impact your 2014 tax return.
Moving paperless. If you haven't registered yet for the Canada Revenue Agency (CRA) service "My Account," you should (go to: cra.gc.ca/myaccount). It allows you to access and manage all of your personal tax information and correspondence with CRA online. On the front page of your tax return, be sure to register for online mail and you'll receive an e-mail notification any time there is mail for you to view on the My Account online service. Your Notice of Assessment will arrive electronically this way. Go ahead, save some trees.
Splitting income. Starting this year you'll have the ability to claim the "Family Tax Cut" credit. Claim it on line 423 on Schedule 1 of your tax return. This credit will allow you to save up to $2,000 in taxes by effectively shifting part of the tax burden from a higher-income spouse or common-law partner to the one with a lower income. You'll have to meet the criteria, and complete Schedule 1A, which has all the details.
Adoption expenses. If you're adopting, or have adopted, a child who is under 18 years of age, you may be able to claim up to $15,000 of adoption expenses (up from $11,774 previously). The expenses should be claimed in the year the adoption process ends. You can split the $15,000 limit between you and your spouse or common-law partner, which can make sense if you're both in high tax brackets.
Children's fitness amount. If you've paid fees for your child to participate in a prescribed program of physical activity, you can now claim up to $1,000 of those fees (up from $500 last year), which will provide tax savings in the form of a non-refundable credit.
Medical expenses. This year, costs for the design of personalized therapy plans for those eligible for the disability tax credit and the cost of service animals used to help those with severe diabetes can now be claimed. Be sure to claim your medical expenses on the tax return of the lower income spouse. This could save you more tax since your claim is limited to $2,171 (for 2014) or three per cent of net income, whichever is less.
Volunteer tax savings. If you're an emergency services volunteer you might qualify to claim a $3,000 amount on lines 362 (volunteer firefighters) or 395 (search and rescue volunteers, which is new for 2014). Alternatively, you can claim an exemption for up to $1,000 of income paid to you as an emergency services volunteer. But you can't claim both the $3,000 amount and the $1,000 exemption. You'll likely be better off claiming the $3,000 amount; a tax pro or tax software can help you make that decision.
Lifetime capital gains exemption. If you happen to own qualified small business corporation shares, or qualified farm and fishing property, you may be able to shelter from tax up to $800,000 in capital gains on the sale of those assets. The rules were simplified this year to accommodate those who do a combination of farming and fishing. Check out CRA's guide T4037, Capital Gains, or speak to a tax pro for more information.
GST/HST credit. If you're entitled to the GST/HST credit paid based on family net income, it used to be that you had to apply for the credit on your tax return. No longer. When you file your tax return, CRA will now determine your eligibility and will tell you if you are entitled to the credit.
Tim Cestnick is managing director of Advanced Wealth Planning, Scotiabank Global Wealth Management, and founder of WaterStreet Family Offices.
Tim Cestnick