Time and time again, I see situations where people have missed out on non-refundable tax credits on prior year tax returns. This can literally mean money out of your pocket as missed tax refunds. This article is going to take a look at a few of the most commonly missed non-refundable tax credits.

Non-refundable tax credits are amounts that the government will credit you to reduce the amount
of taxes you must pay BUT they can only be applied against the amount of tax you owe. So, if you
do not owe any tax for the year, you will not get a repayment of your taxes (non-refundable part).

For example, if you earn $4,000 in the year, your basic personal non-refundable tax credit of $6,794 for 1999 (the full $675 increase to $7,131 will take effect in 2000) will result in no taxes owing. At
the same time the difference between the tax credit amount of $6,794 and the earnings of $4,000 ($2,794) will not result in a payment to you.

Before we go any further, we should take a quick look at changes that are probably going to happen during the next few years. So far, provincial tax has been calculated as a percentage of federal tax. As a result, the non-refundable tax credits apply at the federal and provincial level. This is what will probably change.

With the recommended tax reforms for Saskatchewan, in the future Saskatchewan tax would be calculated separately and different from the federal calculation. So much for simplifying completion of your tax return!

Now back to the credits. One credit I see missed a lot is the equivalent-to-spouse credit. This is where an individual is single, divorced or separated and supporting a qualifying individual at any time during the year.

This means if a person is single then marries during the year and has a qualifying individual, they can still claim the equivalent-to-spouse credit.

Even if a person is married, divorces then remarries during the year (heh, we are just looking at hypothetical situations not how romantically active a person is!) they can still claim this credit as long as they have a qualifying individual.

What is a "qualifying individual"? Basically, a Canadian resident who is a child under 18 and dependent on you qualifies. A child over 18 and dependent on you because of a mental or physical infirmity also qualifies.

The dates used for claiming medical expenses are often misunderstood. The receipts claimed must be dated in any twelve-month period ending in the tax year. So, for 1999 it could be from January 2, 1998 to January 1, 1999.

The dates used do not need to be the same year to year. So, following on the above, for 2000 the dates used could be August 1, 1999 to July 31, 2000.

Why would you want to claim medical expenses like this? The 3% of net income to a maximum
of $1,614 of medical expenses you do not get a deduction for. By varying the dates used, you can possibly get a deduction for medical expenses that you would not get if using the calendar year.
For deceased taxpayers the qualifying period is different.

With new clients I quite often see the disability credit missed. How does this happen? People are unaware of the circumstances that qualify, the ability to transfer the credit and when the credit
takes effect.

Also, if a person requires someone to care for them but does not qualify for the disability credit, the caregiver may still be able to claim a dependant or equivalent-to-spouse credit for the disabled person.

Sound confusing? You are not alone. I see too many people missing out on credits that they qualify for simply because of the vagueness and the twists and turns to the rules that abound with Canada Customs and Revenue Agency (formerly Revenue Canada). Solution? Seek the advice of a qualifying tax professional. Preferably one with a designation (CGA, CA, CMA) behind them.

This article is provided for information purposes only and should be used only in conjunction with the appropriate advice about your specific situation from an appropriate professional.