Year-end can be a hectic time. If you’ve left holiday shopping until the last minute, you can find yourself scrambling to find the perfect gifts for loved ones. While it can be easy to forget about your taxes, here’s why they should be top of mind. Whether you are a salaried employee receiving a T4 slip, or you’re Self-Employed, there are a host of purchases you can make before the end of the year to lessen your tax bill in the coming year.
Consider visiting the doctor or refilling your prescription before December 31 to claim it on this year’s tax return.
Buying Medical Insurance
Although being self-employed has many benefits, such as being your own boss and working on your own schedule, medical insurance isn’t one of them. If you’re self-employed, you won’t have the luxury of employer-paid medical insurance or “extended benefits”. If you’d like coverage for medical and dental, you’ll need to purchase your own Private Health Services Plan (PHSP).
The good news is insurance premiums paid toward medical and dental insurance are generally tax-deductible. Even if you work for a company, medical expenses not covered by your plan can be claimed as a medical expense.
To be able to claim your medical insurance premiums, make sure you pay them before December 31 of the tax year.
Refilling Prescriptions and Buying Glasses
If you work for a company, and you have extended benefits or a PHSP, the cost for refiling prescriptions and buying glasses is usually covered in part or entirely by the plan.
How much is covered depends on your particular medical plan. Some employers even offer a Health Spending Account. An HSA lets you contribute and pay for medical expenses with before-tax dollars. If you have any medical expenses left over after claiming your full amount from your employer, make sure to claim them on your tax return.
If you’re self-employed, you might not have medical coverage. If you’re refilling your prescription or buying glasses, make sure you do it before December 31 to claim it this year on your taxes. Keep in mind you must have medical expenses above a certain threshold to receive a tax credit.
Purchasing Equipment for Your Business
If you’re self-employed, you may need equipment for the day-to-day operations of your business. Even if you work for a company, you may need to purchase equipment. If you’re working from home, buying equipment can include anything from a laptop to a fax machine. If your employer doesn’t reimburse you, you can make a claim on your income tax return.
Instead of claiming the full cost, you’ll need to deduct a portion of the purchase price each year based on how much it depreciates (called Capital Cost Allowance or CCA). The government specifies exactly how much you can deduct each year. If you purchase the equipment before December 31, you can make a claim this tax year.
Paying for Car Repairs
Whether you work for a company or you’re self-employed, you may be able to claim car repairs. Self-employed persons claim any vehicle expenses on the T2125 – Statement of Business or Professional Activities.
Employed taxpayers must have a complete and signed T2200 – Declaration of Conditions of Employment form issued by their employer that states the following conditions are met:
- You’re normally required to work away from your employer’s office.
- You must pay your own vehicle expenses.
- You don’t get a non-taxable allowance from your employer to cover vehicle expenses.
Whether it’s a routine tune-up or installing winter tires, consider doing it before December 31 to make a claim on this year’s tax return.
References & Resources
- Canada Revenue Agency: Allowable Motor Vehicle Expenses
- CRA: Lines 33099 and 33199 – Eligible Medical Expenses You Can Claim on Your Tax Return
Photo Credits
- Thomas Northcut/Digital Vision/Getty Images