Understanding Tax Basics

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It is no mystery that we all hate filing our taxes. The confusion surrounding CRA regulations, the feeling you are paying too much and the frustration of not understanding deductions is enough to drive anyone mad. However, understanding the basic purpose of Canada’s tax system may lessen your stress.

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We all know that taxes are a necessity to pay for government expenditures such as roads and schools. Yet, why do some people receive more tax breaks than others? What is the reasoning behind the rules? The answer at its most basic level is that the government wants to encourage the spending of Canadians in a ‘way they approve of’. You receive tax breaks if you spend you money the way the government would like you to. Each year tax regulations change to reflect the current economy and encourage spending where it is needed. There are however, habits that the government always support. Here are a few examples:

  1. Encouraging you to save for retirement
  2. Encouraging you to go to post- secondary school
  3. Encouraging you to work
  4. Encouraging you to invest in shares
  5. Encouraging you to invest in Canadian companies

 

Tax breaks are also there to help those who have a disability, medical expenses or other unforeseen additional costs. All these credits are given if special condition are met like the following:

  1. For disability tax credit a special form has to be released by your doctor
  2. You can claim a caregiver tax credit for your parents/grandparents if they are 65 years old and if they live with you for a period in time of the year
  3. You can claim tax credit for arts and sport activities for kids under 16 years old.

 

Knowing the motive behind the taxes may ease your frustration but not as much as leaving the rest to the professionals. Contact us as info@cpa4toronto.com to take care of the confusing parts. We can help you with all of the tax preparation, find which tax breaks apply to you and help you gain a higher rate of return.

 

Nicole Dronca, CGA