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Taking advantage of every tax deduction you can claim is always important, but it’s even more important for B.C. taxpayers for 2014 and 2015. The B.C. Provincial Personal Tax Rates for 2014 and 2015 include a temporary additional tax which will be applied on taxable income above $150,000. Here are some tips to reduce your personal taxes in 2014.
1) Make a contribution to your Registered Retirement Savings Plan (RRSP)
If you have unused contribution room in your RRSP, you can create a 2014 taxable income deduction by making a contribution to your RRSP before the end of the year or within the first 60 days of 2015. This is a deduction; meaning you will be saving tax at the highest tax rate applicable to your income. Effectively planning when to use your RRSP contribution can help reduce your taxable income, particularly if it tends to fluctuate from year to year.
If saving money for your first home purchase is one of your current financial objectives, making the RRSP contribution now can not only save you personal tax in 2014, but also ensure you have maximized your RRSP funds available for the Home Buyers Plan. You cannot deduct the interest on a loan taken out to directly contribute to your RRSP, however, your MNP advisor can discuss cash flow planning options that will allow you to access funds from your practice.
2) Deduct moving or travel expenses
If you have moved to a new home that is at least 40 kms closer to your new practice location, you can claim a variety of eligible moving expenses (specific to renters or homeowners).
As with RRSPs, moving expenses represent deductions – therefore you will save tax at the highest rate applicable to your income.
If you haven’t moved but are just travelling to a different locum site, unreimbursed expenses related to travel to and from new locum locations during the year are not deductible as moving expenses, but should be considered as deductible practice expenses. As such, deducting these against your practice income has the same effect of reducing taxable income.
3) Make a charitable donation
Although eligible donations are claimed as a tax credit rather than deductions from taxable income, they do create opportunities when the tax credit created is higher than your highest tax rate. After your first $200 of eligible donations, the tax credit for a B.C. tax payer is almost 44%. In 2013 dollars, you would not have been paying tax at 44% until you were taxable on $135,000.
The First Time Donor Super Credit announced in 2013 is available for use once in any year up to 2017. There are many details that will determine whether you qualify, but the intended outcome is that your first $1,000 of donations increases your available tax credit by $250.
If you are thinking of realizing the gain on a share or security that is traded on a designated stock exchange and also planning to make a charitable donation for the year, consider contributing the security as a donation directly. This type of donation can create very tax-efficient results.
To learn more, contact Don Murdoch at 250.763.8919 or
[email protected], or your local MNP Advisor.
Related Topics:Doctors; Personal Tax; Corporate Governance; Tax Credits
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