Deductions and credits
Pay amounts eligible for deduction or credit prior to December 31st
Many items which are creditable or deductible for tax purposes must be paid by the end of the year. These amounts include alimony and maintenance, child care expenses, investment counsel fees, professional dues, charitable donations, medical expenses and political contributions.
In addition, gifts of certain publicly-traded securities are not subject to capital gains tax. Where certain conditions are met, employees who donate certain securities acquired through a stock option plan to a qualifying charity may deduct a portion of their taxable stock option benefit. Specifically, when combined with the regular stock option deduction of 50%, none of the stock option benefit will be taxed when shares are gifted. An employee may also be allowed to deduct a portion of their stock option benefit if the proceeds from the disposition of the securities acquired through the stock option plan are donated.
For donations made on or after February 26, 2008, the capital gains tax exemption was further extended to capital gains realized on the exchange of certain unlisted securities for publicly-traded securities, when the publicly-traded securities are then donated within 30 days of the exchange.
Consult with your BDO advisor for further details on how these measures apply.
Pay for medical expenses and charitable donations in one year
There is usually an added benefit if payments for charitable donations for two years are grouped into one year. This is due to the fact that the first $200 of donations is eligible for a 15% federal non-refundable credit in 2009 while the excess over $200 is eligible for a 29% credit. You’ll receive a larger credit if you group two years of donations in one year.
In the case of medical expenses, only amounts in excess of $2,011 (limit may vary by province) or 3% of net income (whichever is less) are eligible for a credit. Note that in Québec, eligible medical expenses must be reduced by 3% of family income. If your medical expenses for the current year are already in excess of the threshold, consider paying for additional expenses which are expected to arise in the near future now. Although most medical expenses are only paid as the medical services or supplies are required, some types of expenses can be moved up to get a higher credit, such as glasses or contact lenses. If you’re paying for a major expense on an instalment basis (such as braces for a child), consider paying the balance owing early to maximize your medical credit claim.
Make use of the Home Renovation Tax Credit
If you haven’t already, you should consider whether you have taken full advantage of the Home Renovation Tax Credit (HRTC) before it disappears on February 1, 2010. For 2009, you will be able to claim a 15% non-refundable tax credit for qualified expenditures made in respect of eligible dwellings. The credit will apply to expenditures in excess of $1,000, but not more than $10,000, resulting in a maximum credit of $1,350 ($9,000 x 15%). Expenditures for renovations or alterations to your home that are of an enduring nature can qualify for the credit. The CRA has provided a list of eligible and ineligible expenditures on its website.
Expenditures for work performed or goods acquired after January 27, 2009 and before February 1, 2010, will be eligible for the credit. The credit will, however, not be available in respect of expenditures for work performed or goods acquired in that period if the expenditure is made pursuant to an agreement entered into before January 28, 2009.
For more information on the HRTC, read the article “A Good Tax Reason to Renovate your Home” in our Tax Factor 2009-02 publication.
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