No one likes to pay taxes. The fact is we have to pay taxes on our earned income. But there are some deductions available to the average person that can help reduce the amount of tax paid.
- RRSP’s – are perhaps the best. By contributing to a RRSP you may be able to change which tax bracket you are taxed in by lowering your taxable income.
- Medical expenses. These are often over looked. Keep a record of out of town trips to doctors (as long as the service is not available in your home town or you were referred by your doctor) you can claim travel and meals. These add up in a hurry! Any prescriptions, dental work or eye exams and glasses, private health care insurance premiums are all medical expenses. Total all expense incurred by you and your dependants for the year, the amount over 3% of your net income or approximately $1850 becomes a deduction.
- Employee expenses. There are few expenses here that can be claimed however, if your employer requires you to buy tools costing more than $1000 then you may be able to claim them. Apprentice mechanics may deduct any new tools they purchase. Ask your employer or tax preparer for the required forms and rules.
- Investment fees. If you have investments then you may qualify to deduct some of the fees associated with the management of those investments. Accounting fees and tax preparation fees become deductible.
- If you have a home based business (i.e. Avon sales, Watkins, etc) you may be able to claim a home office. If you have a home office then a percentage of any home related expenses (power, gas, taxes, maintenance, etc) become deductible. The percentage you can claim is based on the percentage of your home that makes up your office. (i.e. if you have 10 rooms in your home and you use one for an office then you could claim 10% of your expenses.)
- Donations. Donations made to a charity can be carried forward for up to 5 years. It is often best for one person to claim all the donations for the family rather than split them between spouses since a higher percentage of donations over $200 become deductable.
These are just a few of the ways that you could reduce the amount of taxes owing at the end of the year. For more ideas visit your local book store and buy a book about taxes. You may find more ideas specific to your situation. You could also talk to your tax preparer or financial planner.
