2012 Year End Tax Planning

So, you are busy with eating, drinking and shopping now, forgetting all about the dreaded tax year deadline of December 31st, 2012.

Would you believe all your shopping expenses can be paid of by your tax refund if you pay attention to your tax planning in today. Now is a good time to take advantage of tax credits and deductions and leave more money in your wallet and less on your 2012 tax bill. Money to pay your bills.

Tax planning a year round activity. Its not a last minute Christmas shopping like activity. If you act before the year end, you can reduce your tax bill by thousands of dollars.

This survey result is like Christmas present to the CRA. H&R Block found in a survey that 30% Canadians are planning to do something before the end of the year to help with their 2012 returns. 36% say they have no plans and 29% have not thought about it.

If you want to claim a charitable donation on your 2012 return, you have to make it before Dec. 31. If you have already made more than $200 donations in 2012, it will be worth a 29 per cent federal tax credit instead of the 15 per cent for donations under $200.

For a bigger tax break spouses can pool their contributions and donations and claim them in the year they made them or carry them forward for up to five years.

Now also is a good time to review your stock portfolio. The markets rose and fell in 2012 so many people may still be facing capital losses on their investments from previous years. Dec. 23 is the deadline for making a trade if you want it recorded on your 2012 tax return. Capital losses can be carried back three years or carried forward indefinitely.

Fees for daycare, summer camp or boarding school for children under 16 can be deducted if parents either are working or attending school full time. Generally, the parent with the lower income should claim the deductions.

Also, you can reduce your tax by claiming either all or part of expenses related to a medical expense. Dentist bill anyone?

Some of the lesser-known expenses that can be claimed include hearing aids, guide dogs for the blind, bathroom aids, attendant care for people with a disability, an air conditioner to ease a severe respiratory ailment, incremental expenses to provide accessible housing (such as home renovations to ease mobility), incremental costs to acquire gluten-free products for people with celiac disease, and tutoring services for people with a learning disability.

Spouses who share the costs for these expenses can pool their claims for greater savings.

If you are single, divorced or separated, you may be eligible for the equivalent to spouse credit and, for tax purposes, claim children under 18 or any other family members who live with you and are dependants.

People with a severe or prolonged mental or physical disability can apply for the disability credit if the disability significantly impedes their ability to perform routine tasks of daily life.

Canadian families providing in-home care for a dependant adult relative, including an aging parent or other relative with a mental or physical impairment may be eligible for the caregiver tax credit provided the dependant’s net income is below certain threshold amount.

If you own a business or self employed in 2012, you get many other opportunities to reduce your taxes.

Consult a tax professional now.