Attend a free online retirement planning workshop. Register
It’s that time of year – days are getting longer. Maple syrup season is upon us. And we’re getting ready to file our taxes. Doing our taxes can seem to take almost as long as making maple syrup (40 litres of sap boils down to one litre of syrup!), but the process may feel far less sweet.
That could be because income tax rules frequently change, primarily as a result of new government budgets. So, we need to continually monitor our tax situation to ensure we’re taking advantage of the available credits and deductions that the tax system offers.
It can feel hard to keep track! But we can help.
Each year, RTOERO works with financial experts to prepare a tax tips publication for our members. While the resource isn’t a replacement for personalized advice from your accountant or tax advisor, it provides:
Here are some general considerations covered in the guide. And below, we’ve offered tips for keeping tax time manageable.
If you are 65 or older, you may be eligible to claim an age tax credit. The credit amount is based on your individual income level and is eliminated once your income exceeds a threshold level. This credit can be transferred between spouses or common-law partners.
If you are 65 or older, you are entitled to a non-refundable tax credit of eligible pension income. Eligible pension income does not include OAS, CPP, or Guaranteed Income Supplement payments. If you are under 65 years of age, only certain payments are eligible for the credit. This credit can be transferred between spouses or common-law partners. Consult your tax advisor to determine the types of payments that qualify and whether you can transfer some of your unused credit to your spouse or common-law partner.
Medical expenses in excess of the lesser of $2,479 and 3% of your net income that were paid for in any 12-month period (assuming that they were not used to claim a credit previously) are eligible for a non-refundable tax credit. Medical expenses can be claimed for yourself, your spouse or common-law partner, and for certain other related persons.
If you’re 65 years or older, you can start to receive Old Age Security. If you’re earning income, the amount you receive may be affected. A claw-back tax will apply if your net income is greater than a specific threshold. The amount you have to repay is 15% of the amount by which your net income exceeds the threshold up to the amount of OAS you received during the year.
Other items you may want to investigate include:
Our tax tips publication goes into more detail about each of these considerations and more. The publication is updated annually to reflect current threshold amounts and include any changes to legislation.
Reviewing updates to tax legislation, like what we cover in our tax tips publication, is one way to help make tax time more manageable. Here are some more tips that can help:
Consider tracking your expenses monthly. You might consider keeping a spreadsheet with things like medical expenses, renovation costs and public transit costs since they could be eligible for a tax credit. This activity will also help you evaluate your spending.
Save your receipts in a single location. You might create a folder on the computer for the current tax year and a subfolder called expenses to save electronic receipts. You can use a physical folder and save print copies of all receipts. Many people choose to print off all receipts. You’ll need to keep everything for seven years. Your organization will be useful each year, but also if you’re ever audited.
When you give to charities as a monthly donor, you’ll receive one tax receipt for each charity you donate to covering all of your donations for the year. This means you don’t have to keep track of multiple receipts through the year. This type of giving can also help the charities you support because it provides them with reliable, recurring income.
If you’re working in retirement, it can impact your OAS and potentially your employer pension. Make sure you’re aware if there’s a maximum number of days you’re able to work without impacting your pension. And understand how much you’re able to earn from all income sources before you have to start paying back OAS.
You can make adjustments to the amount of tax taken from retirement income sources to prevent owing a larger amount at tax time. Each income source remits income tax independently, which means your marginal tax rate, when all sources of income are combined, could be much higher. You can request that income tax be deducted from CPP and OAS through your Service Canada account. You can also ask your pension plan to increase the amount deducted.
Everything we do at RTOERO supports our vision of a healthy, active future for every member of the education retiree community in Canada. Assistance for things like tax preparation and planning is one of the many ways we do that – it provides peace of mind and also can help you take advantage of what’s available to you so you keep more of your money.
Understanding taxes is part of preparing for retirement. Read our post on everything you need to think about to plan for retirement in Canada for more topics.
If you work in education in Canada, you can join us now, and your membership is free until you retire.