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Many taxpayers who are not subject to withholding on employment income (for example, the self-employed) make quarterly instalment payments (the most recent deadline was June 15). But now there is good news for some taxpayers, who may no longer have to make those instalments. The number-one way to profit from the new Family Tax Cut is to reduce the next quarterly tax remittance for 2015. Here’s a look at how this works, along with five more ways to profit from the Family Tax Cut.
The Family Tax Cut was introduced in the March federal budget as a non-refundable tax credit of up to $2,000 for eligible couples with minor children. It’s based on the net reduction of federal tax if up to $50,000 of a higher-income individual’s taxable income was transferred to his or her eligible spouse or common-law partner, taking advantage of a spouse’s lower income-tax bracket.
This tax break may be available to families where the tax liability of the higher-income spouse was reduced by up to $2,000 for tax year 2014. For those who would normally be making instalments, this new credit may eliminate the need to make instalments – at least until they no longer qualify for the credit.
Here’s why: Instalment payments for March and June 2015 are based on the balance due on the 2013 return. However, if the balance due for 2014 was less than $2,000, you’ll not be required to make instalments for 2015. This means you can safely skip the June 15 instalment payment with no negative repercussions. Check with your DFA Tax-Services Specialist to see whether this tax break will apply in your circumstances.
Instead of lending that excess instalment money at no interest to the government only to get it back next April, you could put it to good use to increase your own net worth. Here are five more ways to top up your post tax season windfalls:
* Pay down non-deductible debt if you have it.
* Make an RRSP contribution if you are eligible.
* Make an RESP or RDSP contribution if are eligible to do so.
* Make a TFSA contribution.
* Add the money to your non-registered investment account.
Courtesy Fundata Canada Inc.© 2015. Evelyn Jacks is president of Knowledge Bureau. This article originally appeared in the Knowledge Bureau Report. Reprinted with permission. All rights reserved.
