VANCOUVER, British Columbia, Jan. 16, 2020 — Thinking about your taxes and how you can maximize your tax savings? Here are the three questions you should consider asking a tax expert to help you prepare for the tax season:
1. What can I deduct on my income tax return? You can reduce the amount of B.C. personal income tax you owe through basic tax credits. But if the total of these credits is higher than the amount you owe, then you won’t get a refund of the difference. Some changes from Budget 2018 include the replacement of the Infirm Dependent and In-Home Care of Relative Tax Credits with the B.C. Caregiver Tax Credit, as well as the elimination of the Education Tax Credit for 2019 and beyond. Here’s a snapshot of some of the most commonly used B.C. Basic Tax Credits:
|Basic Personal Amount||$10,682|
|B.C. Caregiver Credit||$4,674 (reduced when dependent income exceeds $15,820)|
|Age (65 or older by end of tax year)||$4,791 (reduced when income exceeds $35,660)|
|Charitable and Other Gifts||Actual (lowest tax rate on first $200; highest tax rate on excess)|
|Medical Expense Credit||Actual (reduced by lesser of 3% of net income or $2,221)|
|Student Loan Interest||Actual|
If you make regular charitable donations and incur medical expenses, be sure to keep a close record of everything. Every dollar counts when it comes to tax credits.
2. What records do I need to keep? It’s important to keep organized records to make filing your taxes a simple process. That way, you will be more likely to be able to maximize your eligible deductions, and ultimately reduce your taxable income, which will lead to less taxes owed.
Make it a priority to keep good personal financial records and have a file that contains all your tax forms. You could also consider using a financial management app to track your spending. Remember, you want to keep your records for a minimum of six years.
3. How can I maximize my savings account? The 2019 tax year may be over, but you still have until March 2, 2020, to make a RRSP contribution for 2019. Check your RRSP deduction limit on your 2018 Notice of Assessment to determine how much you can contribute for 2019. The maximum RRSP limit for 2019 is $26,500. If you have an employer matching program, you should confirm how much you and your employer have already contributed to your RRSPs in 2019.
If there is room left for contribution, consider making an additional contribution to your RRSP for the 2019 tax year. By doing this, you may gain some tax savings. However, remember that you can make an RRSP contribution and not claim a tax deduction in the same tax year. If you think your marginal tax rate will be higher in the future, you should consider applying the deduction in a future year.
If you didn’t maximize your TFSA contribution room for the 2019 calendar year, you could also consider moving some of your money from your chequing (or savings) account into your TFSA account. For 2020, the contribution room is $6,000. Remember, your contributions to TFSA are not tax deductible and the contribution room can be carried forward indefinitely.
If you do your taxes yourself, be sure to visit CPABC’s RRSP and Tax Tips at rrspandtaxtips.com for tips on income tax filing. However, filing your income tax return can be a complicated matter. Consider consulting a chartered professional accountant for professional advice.
NOTE TO JOURNALISTS: CPAs are available for interview.
Please credit Chartered Professional Accountants of British Columbia (CPABC) for use of the content and include the following disclaimer: Tax rules relating to these RRSP tips are complex. This is not intended as tax advice, and you should not make tax decisions based solely on the information presented in these tips. You should seek the advice of a chartered professional accountant before implementing a tax plan or taking a tax filing position.
About CPA British Columbia The Chartered Professional Accountants of British Columbia (CPABC) is the training, governing, and regulatory body for over 37,000 CPA members and 5,000 CPA candidates. CPABC carries out its primary mission to protect the public by enforcing the highest professional and ethical standards and contributing to the advancement of public policy.
For more information or to arrange an interview, contact: Vivian Tse, Public Affairs Manager 604.488.2647 [email protected]