Eighty-six per cent of Canadians say they are somewhat confident that they will take full advantage of all deductions, credits and savings available to them as they prepare their tax returns, found an IG Wealth Management study released April 26.
However, many people may be leaving money since only about one-quarter consider themselves to be ‘very knowledgeable’ about how they are taxed. Meanwhile, 50 per cent of Canadians says they’ll prepare their own tax return, the study revealed.
The study also showed a knowledge gap exists in how investments and savings are treated from a tax perspective. For example, just 42 per cent of respondents understand how capital gains are taxed and under one-third understand how dividend income is treated.
"The tax system is complex and constantly evolving – it requires vigilance to ensure you're getting the most out of your annual filing," said Jeff Carney, President and CEO, IG Wealth Management and IGM Financial. "With fifty per cent of Canadians saying they'll manage their own tax filing, it's likely that many people could be missing out on deductions and credits they have a right to claim."
IG Wealth Management highlighted some tax considerations that Canadians should watch for this filing season. One is the Principal Residence Exemption. The government now requires taxpayers to report basic information on the sale of a principal residence in their tax returns.
Canadians should also be careful of TFSA overcontributions. “Many Canadians dip into their TFSAs and then ‘pay back’ their withdrawal when they receive a cash infusion. However, withdrawals from your TFSA are not added back to contribution room until the following tax year, meaning you can easily go over your contribution limit, resulting in non-deductible interest charges,” warns the company.
Work with a professional
Aurele Courcelles, Assistant Vice-President, Tax & Estate Planning, IG Wealth Management, says not only a lack of knowledge could be keeping Canadians from getting the most out of tax filing season, but also a lack of planning.
"Most of us start paying attention to our taxes in March or April, right before the filing deadline. By that time, it's too late," he says. "If you want to be tax smart you need to make tax planning a year-round activity. If you're unsure of how to approach things, it's important to seek out the help of a financial professional who can work with you to ensure you're structuring your finances strategically."