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HOW TO SAVE MONEY ON YOUR TAX RETURN

By Mariam Ganni, CPA, CA

​March 8th, 2016

Have you ever felt clueless about your taxes? Do you just pile up every single receipt and hope that your accountant will somehow manage to use it in your tax return to help you save money? If so, then this post is for you. Read these seven tips to make sure you get the maximum refund on your tax return this year!


  1. File your tax return
    As silly as it sounds, lots of people think there is no need to file a tax return since they earn low income, or no income at all! This mistake leads to lost credits and benefits which can equal to a quite large amount of cash. Also, if you earn low income, that income can still earn you RRSP room that you can carry-forward to a future year which will be useful when you will make more dough.

  2. Claim all your medical expenses
    Most people don’t know this, but cosmetic surgery is an eligible medical expense for tax credits if the procedure was done before March 5th, 2010. Cool, eh? Now ladies, that doesn’t mean you can go and get nipped and tucked because now plastic surgery expenses are only eligible if the procedure is necessary for medical purposes, such as congenital abnormalities. Other interesting expenses you can claim are medical marijuana, gluten-free products if you suffer from celiac disease, laser eye surgery, blood tests and vaccines. However, for most of these expenses, you may need a letter from a medical practionner confirming the condition.

    You can view the full list of eligible medical expenses here

  3. Keep your metro/bus passes
    If the public transit is your primary way to get around the city, you can claim the cost of your monthly pass in your tax return! Just make sure you keep these passes since the government regularly conducts audits to verify these amounts. Remember you can be selected for an audit up until six years after having filed your tax return, so these passes are still worth money long after they’re used!

  4. Make sure you claim tuition and interest on student loans
    Let me guess, you don’t care about taxes yet since you’re still a student? Well, this just might interest you! You can actually claim all amounts related to tuition, education and textbooks. And if you’re feeling nice enough, you can also transfer unused amounts to a spouse or parent, or if not, you can carry-forward these amounts to a future year. Also, make sure you take a loan during your studies since you can indefinitely deduct interest paid on these loans. Very advantageous!

  5. Home office
    Are you one of the lucky ones that get to work from home? If so, you will be even happier to learn that you can deduct expenses for a work-space-in-the-home. It just has to be the place where you mainly do your work (more than 50% of the time). You can deduct a reasonable percentage of a bunch of expenses, such as electricity, heating, maintenance, property taxes, and even home insurance! 

    You can read more about the work-space-in-the-home here​. 

  6. Cell phone bill if used for work
    If you own a business or work as a self-employed individual, or even if you work for someone else, your cell phone is a legitimate business expense that can be deducted on your tax return. However, you can only claim the portion of usage related to business. Bummer! Also, if you work for someone, you obviously can’t claim any amount that was reimbursed to you by your employer! Life is just not THAT good.

  7. Donations
    Be generous Montrealers! It is possible to claim all amounts that were donated to charities. However, be careful not to be too generous either, since you can only claim up to 75% of your net income! Still pretty awesome, eh?

SHOULD I ''INCORPORATE'' MYSELF?

By Mariam Ganni, CPA, CA

October 14th, 2015

The first question that arises as a self-employed individual. Like many other things, the answer is never black or white. In fact, there are several aspects to be assessed before deciding whether incorporation is advantageous or not. 


Let's start with the basics. When a person gets into business, they have the choice to be considered as a sole owner or to create a corporation. Under Canadian law, a corporation has the same rights and obligations as a natural person. This is what constitutes the first advantage of incorporation: since the company is regarded as a legal person, it has a separate existence from that of its shareholders. Thus, liability is limited to the initial investment in the case of a bankruptcy. However, it should be noted that this advantage is often offset by the fact that creditors require legal safeguards against the assets of the main shareholder.


So what is the main advantage of incorporation? Saving money! In fact, the company is subject to a lower tax rate than the individual, especially if it is a private corporation under Canadian control. It will thus have the right to claim the small businesses deduction on the first $ 500,000 of the company's income. That portion is taxed at a combined rate of only 19%!


The company can also decide its method of payment by paying a portion as salary, and the rest as dividends, while finding the most advantageous combination – a whole other debate!

It is also possible to pay dividends to other people, usually the children of the principal shareholder, which often have low incomes and are therefore taxed at a lower rate. This is called income splitting.


Finally, another advantage not to be forgotten is the tax deferral. In fact, you can decide to keep the funds in the company rather than to withdraw it as a salary or a dividend, something you cannot do with an individual company. The money accumulated over the years can be an excellent pension fund!


Now that I have highlighted all the benefits related to incorporation, one must not forget all the implications of incorporating, In fact, the start-up costs are way higher. These costs include legal fees for the registration of the name of the company, the shareholders' agreement, the incorporation to the Registrar of companies in Quebec. We must not forget the accounting fees for the production of financial statements and for the tax return (the company must file its own tax return, different from the personal tax return of the shareholder). There are also many increased formalities along with a more complex structure.


Conclusion

Finally, as you can see, there is no simple rule for incorporation. In my opinion, it is advantageous to incorporate your company only if your standard of living is less than the income generated by your company. Therefore, you can enjoy all the benefits such as tax deferral by keeping some money in the company, since it is taxed at a lower rate than an individual.