Cheryl (named changed to protect her privacy) is a client of Piligrim Accounting who has a wonderful habit of saving all of her receipts in freezer size plastic bags each year.
She has one for household expenses, one for major purchases, one for financial papers, one for medical receipts with copies of prescriptions, etc. It is a simple system, but it allows her to find what she needs quickly. She even puts each month’s receipts in a labelled envelope within the plastic bags.
These little attentions to details have saved her thousands of dollars in taxes that she would have been denied had she not been able to produce receipts.
As an example, last year her doctor prescribed air conditioning for her because of her chronic lung disease and difficulty breathing. She had a company come and install air conditioning in her home and of course saved the receipt. She had no idea that she could claim it as a medical receipt…but she saved it anyhow.
When we were doing her tax returns, we saw the prescription and the receipt and made the hefty claim for her and it went through.
Last year we were able to claim classroom supplies for a Grade 1 teacher who had all her receipts but didn’t realize that because of her profession, she could make a claim for using her own money to support her classroom.
We also helped a small business person who worked out of his home office claim a percentage of his lawn-mowing and snow-clearing expenses with receipts.
All of these incidents led our team to have a unanimous answer to the question: What can I do to reduce my taxes?”
Our immediate answer is: “Save your receipts!”
Unless you are familiar with all of the intricacies of income tax, saving your receipts in an organized fashion is vital so your tax preparer can use them for claims for tax deductions when possible.
Many times a client will mention that they spent money on something and ask if it was deductible and when we say yes, they email back to tell us that they can’t find the receipts and in many cases, cannot secure copies of them. This lack of attention to detail is like throwing money to the wind.
Remember that as a general rule, for every dollar you have in receipts for something you can legitimately claim, you’ll get back 25 cents. It soon adds up. It also saves money in terms of time you won’t have to waste searching for essential receipts.
Here are four other simple ways that everyone can save a little on their taxes:
1. Ensure your taxes are filed and any amount owing is paid by April 30, 2019. That way you will avoid being hit with late-filing penalties.
2. Invest in a Registered Retirement Savings Plan. When you are young, this is still one of the smartest things you can do. You don’t have to pay tax on any income you earn from money invested in an RRSP until you start to make withdrawals from it.
3. Engage in pension income splitting for seniors. Canadians save more than $1 billion a year using this tax strategy. If you have income from a pension, you can split up to 50 percent of your eligible pension income with your spouse or common-law partner.
4. Claim tuition and education deductions if you are still studying. University and community college tuition is tax deductible. If you just graduated, you can also claim interest paid on your student loans as a tax deduction.
Whatever stage of life you are at, there are strategies you can use to reduce your taxes. Talk to a certified tax accountant today and find out what you can do to lower your tax bill.
Certified professional bookkeeper and certified tax specialist Elena Ivanova is managing director of Piligrim Accounting Inc., a national accounting and tax preparation service based in Richmond Hill, Ont. You can reach her at email@example.com.