Evelyn Jacks: Professional Back to School Tax Savings Tips – Part 2

Last week I shared some tax tips that will help you as you plan your children's activity agendas for the year. This week I provide some tips on claiming credits for others expenses such as child care, medical, and transportation as well as how to recover refunds or missed claims.

Child Care Expenses: You may have enrolled your little ones in activity day camps while you work over the summer, but, the “prescribed” activities may not qualify for the credits described last week. Don’t despair, they may, instead, qualify for the deduction for child care expenses, which means you could get more bang for your buck. An increased Canada Child Tax Benefit is possible too. Child care expenses must be claimed by the lower-income spouse, with no benefit if one spouse is a stay-at-home parent, has very low income, or non-qualifying income (such as Employment Insurance benefits, for example). 

Where an activity qualifies for both the child care deduction and the activity tax credits, it must be claimed as child care expenses. The balance can be claimed via the tax credits.

Because this is a deduction, not a credit, claiming a child care deduction will provide a larger marginal tax benefit, the higher your income. For example, at the top marginal tax rate in Ontario, you’ll get back close to half of your $500 costs, as opposed to a maximum benefit of $75 under the Activities credits. 

Medical Expenses. The unreimbursed costs for private health care insurance, glasses, braces and sports medicine, travel to health care services not available in your local community and a host of prescription drugs qualify as medical expenses on the federal/provincial tax returns. To claim for the best family benefit, do use the best 12 month period ending in the tax year, usually on the return with the lower net income (Line 236). That’s because medical expenses will be reduced by 3% of net income or a maximum reduction of $2152. (You’ll reach the maximum reduction limit when net income exceeds $71,733.) You’ll get a federal credit of 15% of the qualifying amount plus the amount based on the lowest provincial tax rate.

For example, John and Cheryl live in Manitoba. John’s net income is $65,000 and Cheryl’s is $30,000. Their medical expenses for 2013 total $1,000. Since John’s claim is reduced by $1950 and Cheryl’s is reduced by $900, only Cheryl can make the claim. The $100 claim would only be worth $25.80 of real dollars to the family (only 2.5% of the $1,000 cost).

Public Transportation. Don’t forget to save those transportation travel passes for a federal non-refundable tax credit of 15% of your monthly expenditures. All the travel pass costs can be claimed by one parent for the whole family.

For example, your transit pass costs you $215 per month or $2580 per year. If you keep the receipts, you can receive $387 back on your tax return, assuming 12 months of travel ($2580 x 15%).

Recover Refunds on Missed Claims. Add it all up and you may be richer than you thought come tax filing season. And, if you forgot to make any of these claims in the past, remember, you can always request an adjustment to prior filed returns.  As there is a maximum 10 year period for most corrections, do so before December 31 to correct errors or omissions made in the 2003 and subsequent tax years. Those missed tax dollars from the past add handsomely to the replenishment of the “back to school” savings bucket for next year.

Evelyn Jacks is President of Knowledge Bureau and author of 50 books on tax and personal wealth management. She is also the founder and director of the Distinguished Advisor Conference (DAC). The theme of this year’s three day think tank in Ojai, CA Nov 10-13 will be “Back to the Future – Collaborative Wealth Management.”  Follow Evelyn on Twitter at @EvelynJacks.