Everyone, despite their state, has to pay taxes. However, there is a range of tax deductions and credits that might help maximize your tax return. As such, we have compiled a list of three useful tips that you can use to enhance your tax return. If you use the tips on this list, you will be able to start saving money for things that matter the most.
If you are a car owner and you use your vehicle to generate income, then you have the chance to maximize your tax returns. For instance, you can report expenses related to vehicles such as insurance, gas, maintenance, leasing costs, registration fees.
Note that we have many other deductions based on whether you buy or lease your business vehicle. For instance, suppose you lease, it is possible to deduct up to $800 for monthly lease payment. That way, you will have an annual tax deduction of $9,600.
But if you purchased your car, it is possible to claim the CCA (Capital Cost Allowance). CCA is a deduction used based on the rate at which your vehicle depreciates. Note that there are factors that might limit the total amount you can claim for CCA.
For passenger vehicles, you will have a limit of around $30,000, while you will have a maximum of $55,000 for passenger vehicles with zero-emission. Also, if the vehicle is personal, you have the luxury of writing off the part that you used to run your business.
To benefit from all that, you need to keep a clear record of all your trips related to business. Be sure to include things like mileage, date, and various purposes of the trip.
Family Benefits and Children Expenses
Few people know that it is possible to lower their taxable income using their children’s expenses. Such expenses include but are not limited to summer camps, daycares, overnight boarding schools. For kids under the age of seven years, the government lets you claim a maximum of $8,000. For children aged seven years and above, you can claim up to $5,000.
To keep getting fantastic family benefits like GST/HST credit, you need to keep filing your tax returns each year. Suppose you are a low-income family, GST/HST might come in handy when you need to offset some sales tax you are needed to pay.
Do you know anything about CCB? It is a tax-free monthly payment used to cover all the expenses incurred while raising kids under the age of 18 years. At the time of writing this guide, CCB provides up to $475.66 each month for every child between the age of six and 17 years.
Note that the amounts of payments are based on the number of children in the family and the net annual income of that particular family.
Registered Retirement Savings Plan (RRSP)
Contribution to your RRSP is one of the best ways to lower your taxable income and start saving for things that matter the most to you. Note that such contributions have deadlines, so you have to stay in the know at all times.
Your contribution will always have a limit of 18% of all your income based on your previous tax year. For instance, in 2020, the maximum contribution was $27,230. It also included all the amounts you never used in the previous tax year.
To know your RRSP contribution limit, be sure to check your authentic CRA My Account. If you don’t want to do it that way, it is possible to check your previous notice assessment. Suppose you are someone who makes more than $50,000 each year, then you should use the RRSP contribution.
However, if you are someone that makes less than $50,000 each year, then it would make sense to submit your contributions to a Tax-Free Savings Account. The reason it makes sense is that you will not owe a lot of income tax to the government. It’s important to learn
about how RRSP contributions work including how to file taxes online in Canada.
Unless you maximize your tax return, you won’t be able to save money for other investments. Therefore, take advantage of the tips shared in this guide and achieve financial freedom today. For more tips, be sure to get in touch with a credible financial advisor in your state.