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Helpful tax changes that could save you money

I'm not a frequent user of Twitter to send out updates to people. But last week I received a notification that I had just sent out a "tweet." Now, I was pretty sure I had not uttered any words of wisdom to anyone at all last week. What, pray tell, did I have to say in this tweet, I wondered. Then I read it: "Just hangin' out at home. Chillin'. I'm bored.'"

As it turns out, our iPad at home is connected to my Twitter account, and my kids were on March break last week, complaining about being bored at home. Turns out that Win, my oldest, sent out a tweet thinking that it was his own Twitter account he was using.

"I'll make it up to you Dad," Win said. "Don't worry about it," I said. "You've saved me thousands in tax over the years, and you'll save me even more going forward thanks to tax changes last year – so you're paying for yourself." He was off the hook. The good news? Your family, like mine, might save you thousands in tax when you file your return this year. Consider these 2011 tax changes that might help:

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1. Children's art tax credit. The government introduced a tax credit, effective for 2011 and later years, that will allow you to claim tax relief on up to $500 of eligible costs for enrolling a child under age 16 (at the start of the year) in artistic, cultural, recreational or development activities. Activities can include things like the performing arts, visual arts, literary arts, music, media, languages, customs and heritage activities, tutoring in academic subjects and more. Additional tax relief is available for kids with disabilities.

2. Medical expense tax credit. You can claim medical expenses for yourself, spouse or children who are minors. But what about other dependent relatives (an adult child, grandchild, parent, grandparent, brother, sister, uncle, aunt, niece or nephew)? You can claim medical or disability-related expenses you've paid on behalf of these other dependent relatives as well, but there used to be a cap of $10,000 in expenses related to these folks. The good news? Starting in 2011, the $10,000 limit was eliminated.

3. Child tax credit eligibility. If you've got a child under age 18 you're entitled to claim a non-refundable tax credit equal to 15 per cent of $2,131 (for 2011). It used to be the rule that only one individual in each home could claim the credit. So, if two families, for example, shared one domestic establishment, only one family could claim tax relief. This was changed beginning with the 2011 tax year to allow more than one claim per residence if more than one family lived there.

4. Tuition tax credit for exam costs. The tuition tax credit was enhanced in 2011 to allow a claim for fees paid to take an exam that is required to obtain a professional status recognized by federal or provincial statute, or to be licensed to practise a profession or trade in Canada. Many ancillary costs such as the cost of exam materials, identification cards and prerequisite materials can also be claimed (but not travel, parking, equipment costs, calculators or computers, or other items of enduring value).

5. Qualifying programs when studying abroad. You can claim a tuition tax credit, education tax credit, textbook tax credit, and can receive Educational Assistance Payments out of a registered education savings plan (RESP) for full-time study at a university outside of Canada, provided the course meets certain duration tests. The requirement used to be that the course had to be 13 consecutive weeks or more in duration. For 2011 and later years, this requirement has been reduced to three weeks or more in duration.

6. Family caregiver tax credit. If you're supporting someone with a mental or physical infirmity, including your spouse, common-law partner or minor children, there's a new tax credit available based on a $2,000 amount. The actual credit equals 15 per cent (federally) of this amount. This new credit is basically an enhancement to other existing credits that you might claim for an infirm dependant. One last point: This credit applies beginning in 2012 (so you won't claim it until next year when filing for 2012).

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About the Author
Author and founder of WaterStreet Family Offices

Tim Cestnick, FCPA, FCA, CPA(IL), CFP, TEP, is an author and founder of WaterStreet Family Offices. More

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