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Newsletter Page 5 - Toronto Certified General Accountant
Newsletter September 2008
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Personal Income Tax - (Cont'd - Page 5)
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Personal Tax Credits – Claim them early at work for extra money in your pocket (cont'd)
If you own a business, you will be better
equipped to explain to your employees the personal tax
credits when you hand out
these TD1 forms at the beginning of the year. Your employees will be
happier to
know that less tax will deducted from their pay, the more personal tax credits
they are
allowed to claim.
I will deal with the following personal tax credits in this newsletter: the
basic personal amount, the
child amount, the age amount, and the caregiver
amount. These personal credits focus on families
who have children under 18
years old, on individuals who are 65 years old or older, and on families
who
are responsible for the in-home care of parents/grandparents (including in-laws)
who are at
least 65, or who are responsible for the in-home care of relatives
who are at least 18 years old and
are mentally or physically impaired.
Personal Tax Credits – You may hear about them in the upcoming election campaign,
but what do these thousands of dollars mean to you in actual tax savings?
The calculation to determine the actual
tax savings on personal tax credits is the following: take
each amount from
the federal TD1form, multiply it by 15%, then take each corresponding amount
from the Ontario TD1ON form (which is likely a little different), multiply
it by 6.05%, and combine
the results to determine your tax savings. Let’s
use the basic personal amount for example: $9,600
from the federal form,
multiplied by 15% is $1,440; the basic amount from the Ontario form is
$8,681, multiplied by 6.05% is $525; the sum of $1,440 and $525 is $1,965.
This means that every
Ontario resident doesn’t pay $1,965 of taxes on the
first $9,600 of income. So the next time there’s
a federal government budget,
or during the upcoming election campaign, and personal tax credits
are
announced on the news in thousands of dollars, you can quickly estimate
in your head that the
tax savings for you in Ontario are about 21% of
those amounts announced (15% federally and
6.05% provincially).
Child Amount – under 18 years old on December 31
If you have children under 18 years of age
at the end of the year, the child amount can be claimed
by one parent: the
child amount from the federal TD1 form is $2,038 per child (there is no
corresponding Ontario amount for this credit from the TD1ON form), multiplied
by 15% is $306. If
you make this claim, you will save $306 in taxes for each
child under 18 from being deducted from
your pay throughout the year.
Age Amount – 65 years old or older on December 31
Individuals 65 or older in the year are
entitled to a federal age amount of 15% on $5,276, or $792
in tax savings.
Provincially, Ontario taxpayers 65 or older are entitled to an age amount of
6.05%
on $4,239, or $256 in tax savings. If you make this claim, you will
save a combined $1,048 in
taxes. And if you are 65 and working, claiming the
age amount on the TD1 form at the beginning
of the year will prevent the
payroll department at your work from deducting the $1,048 from your
pay
throughout the year. Note that the tax savings from the age amount are
reduced when your
net income exceeds levels of about $31,000, and is
completely eliminated once your net income
reaches levels of about $66,000.
You can still make a partial claim and obtain the tax savings if
your
income lies within this range.
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Toronto Certified General Accountant
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