Maximize your 2008 tax savings and get a head start on 2009 with these 10 tips
Expert advice from CIBC's Jamie Golombek helps Canadians save tax all year roundTORONTO, March 31 /CNW/ - With the April 30th tax filing deadline in sight, it's time for Canadians to break out last year's receipts and their calculators. To help taxpayers take advantage of the savings opportunities that may be available to them on their 2008 and 2009 returns, CIBC's Managing Director of Tax and Estate Planning, Jamie Golombek, offers ten key tax tips for Canadians. "Changes to the tax rules each year make it important to double-check what new savings opportunities you may be eligible for," says Golombek. "While each individual's situation is different, there are some tax-effective strategies everyone should consider using."Tips for your 2008 return ------------------------- 1. File on time - While most Canadians must file by Thursday, April 30th, self-employed individuals and their spouses or partners have until June 15th, 2009 to file a return. Keep in mind that those owing tax must pay the remaining balance by April 30th to avoid paying a 5% penalty on unpaid balances and an additional 1% each month thereafter to a maximum of 12%. 2. Report all capital losses - Be sure to report all your capital losses, even if you can't use them in 2008. That's because capital losses can be carried back up to three years or carried forward indefinitely to help reduce or eliminate tax on capital gains in those years. 3. Claim charitable donations - If you and your spouse or partner made charitable donations in 2008, consider pooling them in one of the spouse's or partner's return when filing to take advantage of higher- rate credits. All donations under $200 are credited at 15% federally plus between 4% to 11% provincially while donations over the $200 threshold are eligible for a 29% federal credit plus 11% to 21% provincially (ignoring additional provincial surtax savings, where applicable). 4. Look into pension splitting - If you received pension income in 2008 and your spouse or partner is in a lower tax bracket, you may wish to split up to half of your pension with him or her. Aside from benefiting from your spouse or partner's lower rate of taxation, you may also be able to preserve some or all of the age credit and avoid the Old Age Security benefits clawback with this strategy. 5. File tax returns for minors - Minors with earned income from part time jobs, or even casual employment such as babysitting or yard work, should file tax returns to begin establishing RRSP contribution room for use in future years. Tips for 2009 ------------- 6. Plan not to receive a refund - It may come as a surprise, but the receipt of a large tax refund in the spring means you have loaned your own money to the government, interest-free, for up to sixteen months. To pay less tax all year round, complete a Form T1213 from the CRA which, once approved, will enable your employer to reduce the amount of tax withheld at source. 7. Consider renovating your home - For 2009 only, homeowners may be able to claim a new 15% non-refundable tax credit known as the Home Renovation Tax Credit (HRTC). The HRTC can be applied to renovations of 'an enduring nature' costing more than $1,000 to a maximum of $10,000. Check to make sure your planned renovation is eligible for the credit before you commence and remember only expenditures made after January 27, 2009 and before February 1, 2010, will qualify for the 2009 credit. 8. Contribute to an RRSP, RESP, TFSA or RDSP - Canadians now have up to four special accounts in which to invest in a tax-deferred (or tax- free in the case of TSFAs) manner: a Registered Retirement Savings Plan, a Registered Educations Savings Plan, the Tax-Free Saving Account and a Registered Disability Savings Plan. Each plan offers unique benefits and tax-savings opportunities to eligible investors making it worth examining to see if one or more are a good fit with your overall financial plan. 9. Convert non-deductible debt to tax deductible debt - Make your interest expense tax-deductible by paying off non-deductible debt with non-registered funds and then borrowing back for investment purposes. 10. Try using a spousal loan strategy - Income splitting is the practice of shifting income from the higher income spouse or partner to the lower income spouse or partner to reduce taxes. Income splitting via a spousal loan lets a spouse loan funds at the prescribed interest rate, which drops to an all-time low of 1% on April 1st, to a lower- or no-income spouse or partner and report the net profit in the lower income spouse or partner's hands."Now more than ever Canadians are looking for ways to save. Tax preparation season is the perfect time to review your finances and identify potential tax savings opportunities," says Golombek. "If you're unsure of what tax savings might apply to you, consult a financial professional for help." CIBC is a leading North American financial institution with nearly 11 million personal banking and business clients. CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, in the United States and around the world. You can find other news releases and information about CIBC in our Press Centre on our corporate website at www.cibc.com.
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