If there were celebrity experts on Canada's tax system, Evelyn Jacks might be one of them. The Winnipeg author has written dozens of books on the subject and is renowned nationally as one of the leading experts on our ever-shifting Income Tax Act.
Her books have become almost a rite of spring. Right when many of us are trying to make sense of all the receipts, tax forms and other paperwork to prepare our returns for the April 30 deadline, her latest edition of Essential Tax Facts, is often hitting store shelves.
The latest edition, this year renamed Family Tax Essentials, will be released next month, and it is an accessible guide for individuals wanting to work on developing tax-efficient strategies year-round to keep as much of their wealth as possible out of the hands of the tax man.
Yet Jacks -- who is also the founder and president of the Winnipeg financial education institution, Knowledge Bureau -- recently released another book: Jacks on Tax: 2014. In its second edition -- the first edition was published last year--it is intended to be a trusty taxation companion for those of us using tax software to file our return.
Let's face it, these days, we could use a little help to guide us through the maze that is our taxation system.
"Certainly our Income Tax Act has not gotten any simpler," Jacks said. "Electronic filing is just an easier way to get your return to CRA (Canada Revenue Agency), but for many people understanding the questions behind the tax software, making sure they've interpreted the rules properly is still the same issue it was in the manual world."
Jacks on Tax is aimed at those of us who find that while we've filed our taxes successfully using software in the past, we often fumble our way through worrying afterward whether what we've sent the CRA passes the litmus test.
While the book is money well-spent for those who use it as a guide to do their taxes, those of you who would like a few freebie tax tips, have no fear; Jacks sat down with the Free Press recently to talk taxes. Here's a look at what's different for 2013, what we often might miss when filing, and what she changes she would like to see to the tax act to make it fairer.
What's different for 2013
The biggest change for the 2013 year -- this season's return -- is the first-time donor's super credit. This is geared at encouraging charitable donations by people who haven't donated before or those who haven't donated to a charity since 2007.
In addition to the usual federal tax credit of 15 per cent for donations up to $200 and 29 per cent for donations over that amount, qualifying first-time donors receive an additional credit of 25 per cent up to $1,000 in donations for 2013.
So donations up to $200 would receive a total credit of 40 per cent -- $80 in tax savings -- and donations from $200 to $1,000 would receive a 54 per cent credit -- about $432 in savings. When the Manitoba credit is factored in, a $1,000 donation can result in a total tax saving of $672.
The usual suspects
Every year, most available personal amounts increase to keep pace with inflation. For example, the basic personal amount that every tax filer could claim in 2012 was $10,822. This year, the amount increases to $11,038.
What doesn't change, however, is the pension amount, a $2,000 credit worth about $300 in federal tax savings that retirees receiving qualifying work pensions or annuities can claim.
Many of the other ones, from the disability tax credit to the child amount for dependent under age 18, have all been upped on the federal return for 2013 and 2014, too.
Easier to claim travel expenses for medical care
The CRA increased the amount claimable under the "simplified method" for travel expenses incurred when seeking medical care away from where we live. When we travel more than 40 kilometres for care, we can now claim 47.5 cents per km travelled. When we have to travel more than 80 km, we can deduct the costs of food and lodging, too.
Tax savings we often overlook...
Chronic illness and tax savings
The disability tax credit is available to individuals who suffer a chronic illness that markedly impairs their daily lives. To get it, your doctor has to fill out the T2201 form. Jacks says it's important they discuss with their doctor whether they could qualify for the credit, particularly if their conditiondeteriorates. If they do, the credit can result in a lot of tax savings -- important for individuals and families economically affected by illness.
"It's a fairly lucrative credit because for 2014, when you apply that $7,766 credit, it's worth $1,165 in tax savings, and when you add the provincial amount, you're looking at tax savings of over $1,800 a year," she says.
The tax credit can also be applied retroactively up to 10 years if, for whatever reason, you qualify for it stretching back that long but failed to apply for the credit.
"If you did miss this credit every year for the 10-year period under the statute of limitations, you would have missed close to $18,000 worth of credits -- and that's recoverable."
Don't forget, caregivers
While a number of credits exist for providing care for dependents, such as the caregiver amount or the amount for dependent children, an additional $2,040 credit for 2013 is available. It's worth $306 in tax savings.
Tax man goes offshore
It's no secret the CRA is going after tax cheats who hide their wealth offshore to avoid taxes. It has even set up a tip line to report offshore tax evaders. "(The CRA) really do mean business to the degree that they will actually reward your neighbour for telling on you," Jacks says. "The amounts have to be large enough -- $100,000 or more than CRA would have found on its own -- for you to earn a finder's fee of up to 15 per cent on the taxes owing, but not the penalties and interest."
Got foreign holdings? The tax man may want to know
Deliberate tax cheats aside, the CRA is increasing its focus on anyone holding assets outside of Canada that may produce income now or at some point in the future. "Anyone who has foreign property has to take a fresh look at form T1135," Jacks says. "While this form is not new, the government has really notched up the kinds of information that it's looking for and that includes anyone with a rental property in the United States."
You only need to worry about this form if the total cost of your foreign assets -- excluding those held in registered accounts -- amount to more than $100,000, including newly purchased property in the U.S. sun belt.
The wish list
Income splitting for rest of us
While retirees can split their qualifying pensions with each other -- up to 50 per cent of these benefits -- to reduce their income tax, a lot of hubbub has been made about the possibility of income splitting for families. It's certainly a change Jacks would like to see. "Income splitting for families would simplify the tax act a lot because it would take away the need for some of the deductions and credits that we spend a lot of time talking about," she says.
Get low-income earners off the tax roll
One drawback of such a policy, however, is that it would fail to further reduce taxes for low-income earners, especially single parents. But Jacks says changing the requirement to pay tax for certain low-income individuals would help solve this potential problem.
"What would make the Tax Act fairer would be if basic personal amounts were raised to keep the low-income earners off the tax rolls altogether," she says, adding doubling personal amounts for low-income earners likely would do the trick.
"In other words, income that's at or below the poverty line and therefore required for necessities of life -- food, clothing and shelter -- would be exempt from taxation. That would put more money into pockets every two weeks to assist with saving for the future or paying down debt."
Jacks says she'd also like to see sales-tax increases come with matching increases to sales-tax credits, rebates or exemptions for low-income families who are often more affected by broad-based tax hikes -- something the provincial government has yet to do after increasing the PST one percentage point last year.