Just how 'in the know' are you when it comes to your tax return? Every year there are changes and updates to the tax laws. While it is important to have your paperwork in order, there is much more you should know for tax time – understanding what you can claim could help you maximize your refund.
Last year the Canadian government announced new tax breaks for Canadian families including the new Family Tax Cut. Do you how it works? If you said no, you’re not alone. While it may have been featured in a national advertising campaign, this new tax credit seems to be a source of confusion for many, according to the results of a recent Leger survey for H&R Block Canada.
Although 50 per cent of Canadians had heard of the Family Tax Cut, only 15 per cent said they expected any of the new tax changes (including the Family Tax Cut) to impact their tax return. Unfortunately too, the confusion around the new Family Tax Cut may mean Canadians will be leaving money on the table at tax time.
“The Family Tax Cut will provide the most benefit to families where one spouse earns all the income but that is not the only situation that results in tax savings,” says Caroline Battista, senior tax analyst, H&R Block Canada. “Even a small difference in income between two spouses could result in a few hundred dollars of savings so don’t make the mistake of thinking you do not qualify. You don’t want to miss out and pay more tax than you need to.”
And when asked to identify situations where families could take advantage of the Family Tax Cut, the survey results were poor. Although 27 per cent identified families where one spouse earns all the income would benefit, when presented with other options that might qualify, there were few correct answers.
Real-world Family Tax Cut examples
The survey asked Canadians to identify which of the following family examples would benefit from the Family Tax Cut:
One spouse earns $50,000 and the other earns $40,000
- Will benefit. Family Tax Cut savings would be $277.
Only 10 per cent knew this would qualify.
One spouse earns $100,000 and the other earns $75,000
- Will benefit. Family Tax Cut savings would be $484.
Only 13 per cent knew this would qualify.
One spouse earns $80,000 and the other earns $50,000
No benefit. They are both in the same tax bracket.
- No benefit. They are both in the same tax bracket.
The Family Tax Cut allows couples with at least one child under the age of 18 to claim a non-refundable tax credit equal to the amount that would be realized by transferring up to $50,000 of taxable income from the higher-income to the lower-income spouse or common-law partner. The maximum claim is limited to $2,000.
Know what you're entitled to (or find someone who does)
So, what does this all mean? Battista encourages Canadians to do their homework well in advance of the April 30th tax deadline to ensure you know of every tax credit you are entitled to claim to help reduce your tax liability. If all of this seems overwhelming to you, work with a tax professional at a local H&R Block office in your area. They will make the entire process seamless and stress-free and ensure you don’t miss a thing this tax season.