tax calculator with red button

As your clients prepare to file their 2018 tax returns before the April 30 deadline, you can make them aware of relevant tax changes and credits they might have overlooked.

While most high net-worth clients will have accountants prepare their taxes, many middle-income clients typically file their own returns using established tax preparation software. (See story on page 31.)

Available software usually is good at calculating allowable deductions, says Aiman Dally, chartered professional accountant and president of Copia Financial Solutions Inc. in Oakville, Ont. But, he cautions, the calculations done by tax software are based on what the client inputs into the program.

“So, if your client is not aware of [a] particular tax credit,” Dally says, “the software would not necessarily pick it up.”

When offering tax tips to clients, you should recognize that their individual circumstances and income levels will have a direct bearing on the tax credits or expenses they can claim, says Claudio Piron, senior financial advisor with HollisWealth in Vaughan, Ont. Deductions and credits will not be uniform across the board.

Piron says some common deductions that are normally missed by clients include carrying charges, certain legal fees, capital losses and charitable donations. The interest paid on money borrowed to invest to earn investment income, including interest and dividends but not capital gains, is deductible. So are fees paid to manage non-registered investments, fees for investment advice to earn income, and the interest on an insurance policy loan to earn income.

Legal fees paid to obtain support payments from a former spouse or common-law partner can also be used to reduce taxable income.

Piron says clients often neglect to claim capital losses, which can reduce taxable capital gains. Clients can apply capital losses to three prior years to reduce capital gains made in any of those years.

Remind your clients to claim medical expenses over any 12-month period ending in 2018. Medical expenses are capped, however, and cannot be greater than 3% of the taxpayer’s net income.

For the 2018 taxation year, Dally says, eligible medical expenses have been expanded to include certain expenses relating to some trained service animals.

New for clients who live in small, rural communities in Manitoba, New Brunswick, Ontario and Saskatchewan is the Climate Action Incentive, a refundable credit available as of Jan. 1, 2018.

Piron says claiming credits and expenses resulting from disability – whether for your clients or their dependents – can result in significant tax savings.

Adds Dally: “While most individuals are aware of the disability credit, they do not necessarily pay attention to the disability-related expenses they can claim.”

The non-refundable disability credit provides relief for individuals or dependents who have a severe, prolonged physical or mental impairment. Among the expenses that clients should be aware of are attendant care and products and services that help disabled individuals to function, such as software, optical scanners, speech synthesizers and Braille boards.

Closely related to the disability credit is the non-refundable caregiver credit for a spouse, common-law partner or eligible dependant who is physically impaired. This can be a significant tax credit for eligible clients.

Clients also should be educated about child-care expenses incurred for services such as caregiving, daycare services, nursery schools, day camps and day sports schools in which the primary goal is to care for children. Advertising expenses and placement agency fees incurred to locate a child-care provider, as well as registration fees, may also qualify as child-care expenses.