What are Personal Tax Exemptions?

If you are a working person in Canada your income will be subject to certain deductions.  Your income is subject to income tax and deductions for the Canada Pension Plan and Employee Insurance.  All of these are non-negotiable deductions, dependent upon age and status.  However, each and every Canadian resident earning an income is entitled to certain personal tax exemptions.

For 2012 the Federal personal tax exemption amount is $10,822 and the Provincial amount is $9,405.  This basically means that you can earn this much money before being taxed on your income.  For example, if you earn $125,000 in a tax year and you live in Ontario, you can deduct $9,405 before declaring tax on the rest of your income.

If you are filing a joint tax return with your spouse then you can claim one personal deduction for each of you on the tax return.  You can also claim for any dependents that you may have. Dependents include children under the age of 19 or age 24 if they are a full time student if they do not earn enough income to provide at least half of their own support.

If you file a separate tax return from your spouse you can claim exemptions for them provided they have no earned income for the period, they are not filing on a joint return and they are not claimed as a dependent on any other income tax return.

If you are listed as a dependent on some-one else’s return, whilst you may be required to submit your own tax return you cannot claim any exemptions. If you and your spouse are filing a joint return then your spouse cannot be claimed as a dependent.  If you are divorced or separated and claiming for children as dependents only one parent can claim, normally the custodial parent.

If you have aged parents there are certain conditions under which you can claim them as dependents on your tax return for exemption purposes.  Your parents or parents in law can be claimed for providing they are a physical member of your household, they make less than a certain amount of money each year (this figure changes each year) and you are supplying at least half of their support including paying for medical expenses. If this is the case then you will be able to claim an extra personal exemption amount on your tax return.  It is worth taking account of the fact that if you have other siblings who are also helping to provide support for your parent’s only one of you can claim the personal exemption amount.

Personal tax exemption amounts will differ each year so you must check with the Canadian Revenue Agency and with your chosen professional financial service provider before filling in your tax returns, to ensure that you claim the correct amount each year. Mistakes are very difficult to rectify and can be costly as well, especially if you claim more that you should have done.