Few people would describe tax filing as enjoyable, but when you make it a family affair, you could enjoy additional tax relief.  And that’s a good thing – with the cost of raising a family getting higher every day, taking full advantage of every tax-saving opportunity can help ease the burden.

Here are a few tax filing strategies that can help keep more of your hard-earned money all in the family:

·        Goods and services tax/harmonized tax (GST/HST) credit.  You and your children may be eligible for this credit, but you have to apply for it on this year’s return, even if you received it last year.

·        Child care.  The spouse with the lower income should claim all qualifying child care expenses.  A single parent can deduct certain child care expenses from their own income.  These expenses can include baby-sitting, day nursery services, day camps, boarding schools and camps.

·        Tuition and education credits.  Your children attending a post-secondary school can claim tuition fees and certain other educational expenses on this year’s return, or carry them forward to a year when their taxable income will be higher.  Alternatively, any unused credits – those not needed to reduce your child’s taxable income to zero – can be transferred to a supporting parent or grandparent.

·        Equivalent-to-married credit.   If you are single, widowed, divorced or separated and support a child or other family member in your home, this credit allows you the same claim as if that person were your spouse.

·        File for younger children.  Even if your children do not earn enough to pay income tax, have them file a tax return anyway.  Their reported income will generate RSP contribution room that can be used in future years.

·        Medical expenses.  You may generate a larger credit by pooling all family medical expenses on the return of a lower-income spouse.  You can also maximize the credit by choosing to claim medical expenses in any 12-month period ending in the tax year, provided you or your spouse didn’t report them last year. 

·        Age tax credit.  If you are age 65 or older and don’t need the total age tax credit to reduce your taxable income to zero, you can transfer the unused portion to your spouse.

·        Disability tax credit.  This can be transferred to a supporting relative.

·        Dividend tax credit.  If your spouse’s income is very low, you can report their Canadian dividends on your return and claim the credit for all taxable Canadian dividend income paid to them.  Even though your income may then be taxed at a higher rate, this strategy avoids a reduction in the spousal tax credit.  You’ll need to calculate the amount of tax paid via each option to select the one that works best for you and your spouse.

·        Charitable donations.  Pool your family’s donations on a single return to enjoy the much higher federal and provincial credits above the $200 threshold.

·        Political donations.  Split political contributions in excess of $200 because the credit is much higher at lower contribution levels.

Of course, it always pays – in an immediate tax reduction and in more potential growth over time – for every eligible family member to make their maximum RSP contribution as soon as possible in the year.  And even though your contributions to a Registered Education Savings Plan (RESP) aren’t tax deductible, your investment will be growing in a tax-deferred environment to help pay for the escalating cost of a post secondary education down the road. A professional financial advisor can help you keep more of what you earn all in the family for the benefit of everybody in the family.