Today's economy

Want to save $1,000 on your income tax?

By Kevin Press, BrighterLife.ca

Comments (11)

Did you know that having a safety deposit box can earn you an income tax deduction? Evelyn Jacks, author of 50 books and the blog Your Money. Your Life. is one of Canada’s most respected tax experts. She told me in an interview last week that the safety deposit box deduction is often overlooked. “It’s a small thing, but it’s amazing how many people miss it on their tax return,” she said. “You can go back and request an adjustment to your tax return to include it 10 years back. So there’s a quick $1,000 for people if they have missed it in the past.”

Having a safety deposit box can help you save on taxes.That’s just the kind of deduction that Canadians forgo when they don’t fully research their filing, or choose not to work with a tax accountant. “It’s a question of trigger points,” Jacks told me. “Anytime you have a life event or a financial event. This year we can postpone Old Age Security for up to five years starting in July 2013. Most people don’t know about that. But it could be an important turning point. What’s changing in your life? Are you having an important birthday?”

Did you get married last year? Divorced? Did you start a new business or implement a new investment strategy? Has someone in your family fallen ill? “This year we have a new family caregiver tax credit that adds $2,000,” said Jacks. “It’s worthwhile asking if you qualify for that. Should you be adjusting your TD1 tax credit form at work so that your withholding taxes are reduced?”

The potential impact of these key life or financial events is a good argument in favour of working with a professional tax accountant. “It’s not just on income, it’s also on capital,” Jacks told me. “If you’re real estate-rich and something happens to you, you’re going to want to know what your tax liability is … The one thing we can’t control is death.”

Neither can we control taxes, which many believe will rise in the short- to mid-term. The aging baby boom generation will lean heavily on provincial governments for healthcare funding. Already we’re seeing high-income surtaxes introduced in Ontario, Quebec, Nova Scotia and British Columbia. Other provinces could follow that lead. “We will see this year as various provincial budgets come down,” said Jacks. “Another thing to watch is indexation of personal amounts and tax brackets. Many of the provinces have not kept up with indexation to changes in the Consumer Price Index.”

Jacks has two new books out: Essential Tax Facts: Secrets and Strategies for Take-Charge People and Jacks on Tax, Your Do-It-Yourself Guide to Filing Taxes Online.

NOTE: The safety-deposit box deduction was removed in the budget of March 21, 2013, affecting the 2013 tax year.

Income tax Get more smart tips for tax time.

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Diane Renaud on

Someone told me that as a retired person receiving CPP., that my CPP may be reduced if i move in with my siblings. Is that true and by how much.

Danny @ Mint Securities on

Kevin, do you know of how this works within the UK Tax market? Bit of a long shot I know but I have just moved over to sunny England.

On a side-note here in the UK the banks are beginning to stop offering safety deposit boxes as a service, smaller firms are popping up trying to tap in to this market, I wonder if this is going to come across the Atlantic and the reasoning behind the change. Can you shed any light?

Thanks for the great info, as always.

Dan

mark on

This deduction will no longer be available after the 2013 federal budget is passed

Brian Poncelet,CFP on

Want to save more than $1,000 every year in retirement? Look at annuities. Also go to line 314 on your tax return for more details. How about getting back the OAS claw-back and more?

Line 314 – Pension income amount

You may be able to claim up to $2,000 if you reported eligible pension, superannuation, or annuity payments on line 115, line 116, and/or line 129 of your return.

Jackie on

My understanding of the safety deposit box deduction is that the cost of renting the box can be deducted from income if it is used to hold income producing investments. ie stocks, bonds, etc in physical form. How many people still do that? If it simply holds jewellery or important papers unrelated to investments, it doesn’t qualify for the deduction. Am I wrong?

Katherine Kwan on

The deduction for the safety deposit box is good to know, however because of the type of account I carry at the bank I get a free deposit box every year.

    SDC on

    @Katherine Kwan – I think you know this but just in case others are confused, a free deposit box doesn’t get any tax credits.

    And thank you Kevin Press for the clarification about that $1000 tax credit. Of course, you can only get a $1000 tax credit, if you are paying $100 for 10 years and failed to apply the credit in the past. The headline of this story was slightly misleading and it fooled me for a few seconds. :-)

    Question: Who uses deposit boxes these days? There was a time where banks were a permanent fixture in the community. I have already seen my bank branch change locations three times. Besides, I am not even certain that any branch that I have dealt with even have deposit boxes. Hmm…

    BTW, live this website!

      SDC on

      “BTW, live this website!”

      Meant “love” – wish comments could be edited. LOL

Kevin Press on

Evelyn Jacks asked me to add this clarification: “What is available by adjusting for the safety deposit box is $1,000 worth of missed deductions ($100 average cost of box x 10 years) rather than $1,000 in real dollars. Your marginal tax rate will be applied to the deduction amount. If that’s 35%, the deductions are worth about $350 to you. If that’s 45% the real dollar saving is $450, and so on.”

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