Tax tips for members of the Canadian Armed Forces

It’s no secret that military life can be complicated, and we probably don’t need to tell you that taxes are usually always complicated. We’d like to try and make things a bit simpler for our PEI military families by giving a few tax tips specific for you.

If you haven’t already had your taxes prepared for the 2014 year, we have some tips for you that might prove useful (by putting more money in your pocket)!

You should know that as a military family, there are some free tax programs out there you might be interested in. Have a look at these two, for instance:

• http://turbotax.intuit.ca/tax-software/freedom.jsp
• https://www.hrblock.ca/file-in-an-office/military/

Now, there are different categories of military families, and PEI has both full-time and part-time CF members. So, we’ve broken our tips down by category.

Tax Tips for Reservists

PEI has a large percentage of reserve members. The major tax tip we have for reservists is tomake sure that you are getting enough taxes taken off your pay cheque. Since reservists tend to work part time (unless on a contract), they often do not get enough taxes taken off, and they end up owing come tax time. Class A military members often fall into this likelihood, but some short Class B contracts may also not automatically take enough taxes off. To ensure you having the appropriate amount of tax withheld, speak to the military’s payroll processing office, and complete a TD1 form requesting additional tax to be taken off.

Tax Tips for all CF Members

• Be aware of a new tax deduction for high-risk deployments. If you are serving the Canadian Forces or Canadian police services in a high-risk zone outside of Canada, there’s a special deduction for you. Check for box 43 of your T4 to see if this deduction applies to you.
• Retroactive to January 1, 2004, employment income that Canadian Forces and police personnel earn while deployed to high-risk and current moderate-risk operational missions is exempt from income tax.

General Tax Tips for Canadian Families

• Be aware of the new Family Tax Cut, an income splitting tax benefit. To be eligible, families must have at least one child under the age of 18. The Family Tax Cut allows the higher income spouse to shift up to $50K in taxable income while filing under the lower income spouse’s federal tax rate. The result is a savings of up to $2,000 in federal tax payable overall for families meeting CRA’s eligibility criteria. There is no corresponding provincial Family Tax Cut. This could highly benefit military families, especially if one spouse isn’t working or is only working part time.
• You can claim up to $1000 in eligible fitness expenses per child, an increase from $500 in previous years. In addition you can claim up to $500 in eligible arts credits. Since the credit is worth 15% of each child’s registration and membership fees, the federal credit is worth up to $150 per eligible child under 16 with one parent.  For more details on eligibility and the types of expenses you can claim, please see the following: Children Fitness Tax Credit and the Children’s Art Tax Credit
• The Family Caregiver amount for 2014 is $2,058, indexed annually. If you’re a caregiver accommodating a loved one with a disability, prolonged illness, or injury, and you’ve had to make modifications to your home, keep all receipts related to renovations and give them to your tax preparer. To determine eligibility, please see here.
• You may be eligible for moving expenses, if you’ve had to move to be closer to either you or your spouse’s place of employment or post-secondary institution. To qualify for the moving expense deduction, you must move in excess of 40km from your previous home to your new work or educational institution. In addition, moving expenses can only be claimed against the income earned or bursary, scholarship, or similar income at your new location. Military families know all about moving—just note moving expenses tend to be audited by CRA . Be sure to keep your moving expense documentation and/or receipts handy and reduce your moving expense claim amounts reimbursed to you by the military.

Do you have a helpful tax tip to share with other military families?