tax tips

Income split and save: Seniors are allowed to split up to half of their eligible pension income with a spouse or common-law partner. Income splitting allows some seniors to enjoy a significant tax reduction. In the situation where the lower-income spouse has very little income, the tax savings are substantial.

Get your benefits: Any senior receiving Guaranteed Income Supplement (GIS) through Old Age Security should file on time to ensure their benefits continue uninterrupted.

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Many qualifying taxpayers miss claiming the Disability Tax Credit because they don’t think it applies to their situation. Here is some advice for Canadians who may qualify for the Disability Tax Credit:

• Review your situation: The Disability Tax Credit has criteria you must meet in order for you to qualify. In particular, your disability must make it extremely difficult or time-consuming to carry out basic activities of daily living even if you are undergoing therapy and using appropriate devices and medications.

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• • New mom surprise: Service Canada usually withholds insufficient tax from EI benefits. If you are a repeat claimant and your net income is more than $55,250 you may also have to repay some of your benefits. This means that some new mothers find they owe tax even though they can claim the child amount for the newborn.
  • Newly retired: Recently retired seniors often find themselves in a pickle in the year they retire with a tax bill in the year they retire because no tax is withheld from their Old Age Security (OAS) or Canada Pension Plan (CPP) retirement benefits unless they specifically requested it.

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• Marital status: For tax purposes, your marital status is determined on December 31 of the tax year. So if you are separated on December 31, 2011, you would put “separated” as your marital status. If you were in a common-law relationship, you are only considered separated if the period of separation lasts 90 days or more, so if you separated on December 1, you will not be considered separated on December 30 unless you remain separated on March 1.

• Inform the CRA: Breaking the news to the Canada Revenue Agency may not be high on your list of priorities. However, since your GST/HST Credit and Child Tax Benefit is now based solely on your income, it will usually be to your advantage. Use Form RC65 Marital Status Change to advise them and they will recalculate your entitlement effective for the next payment date.

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