Filing your taxes can seem like a daunting task but it doesn’t have to be. The hardest part is knowing what you’re eligible to deduct and claim for credits on your return. There are many tax-saving opportunities that people easily forget about and this list will be good reminder on what kind of tax relief is available to you as a taxpayer.
RRSP contributions—This is probably the most common deduction around as many Canadians make regularly contribute to their RRSPs. Your contributions can be deducted against your income, which will decrease how much tax you owe. What most people don’t know is that you don’t have to claim the deductions in the year you make them; you can carry them forward. This is beneficial if you expect to be in a higher tax bracket in later years. Waiting to make a deduction when you’re in the top tax bracket will maximize your refund.
Moving expenses—If you moved 40km closer to your place of work or you moved to go to school you can deduct moving expenses. The trick here is that you can only deduct moving expenses against the income you earned after you moved. You can find a full list of the expenses on the Canada Revenue Agency (CRA) website.
Interest on loans—Most people think of interest on student loans, which is deductible on your tax return. However, interest paid on a loan (or line of credit) to purchase an income-generating asset is also deductible. A rental property or a dividend-paying stock are examples of income-generating assets.
Transit passes—Transit passes (not tickets or tokens) can be included in your tax return to produce a credit that can be used to decrease your taxes payable. Make sure you keep your receipts for these purchases as you never know when the CRA will come knocking.
Charitable donations—Giving to charity can help earn you tax credits. You should include all your donations on your return. If you’re married or common-law, think about combining them all onto one return to maximize the value of your credit. If you haven’t donated in five years, you’re eligible for the first-time super donor’s credit, which increases the value of this credit even more!
First-Time Home Buyers’ Tax Credit—If you’re thinking of purchasing a home, this credit is for you. The First-Time Home Buyers’ Tax Credit allows you to claim up to a maximum of $5,000, which comes out to a $750 credit on your return. The trick here is your or your spouse can’t have purchased a home for five years.
Children’s arts and fitness tax credits—If you have kids, make sure you’re keeping the receipts for the activities they enroll in during the year. The child’s fitness credit is $1,000 per child and the child arts credit is $500 per child. That’s a lot of tax savings you could be missing out on.
Family Tax Cut—This credit is a way to income split in families where there’s a significantly higher income earner. But you must have children under the age of 18 to do so. This credit maxes out at $2,000 and grinds down if you are earning over a certain threshold. For more information, visit the CRA website.
Medical expenses—This is probably one of the hardest credits to claim on a Canadian tax return and I’d like to think that it’s because our health care system is so good here in Canada. Certain medical expenses can be included on your income tax return but you can only deduct them if they meet the threshold, which is the least of 3% of your net income or $2,208.
By no means is this an exhaustive list of deductions and credits available, but it’s a good start. If you know what’s available to you, you can make informed decisions. If you have a very unique circumstance, it might be wise to speak with a tax professional.
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