Let’s face it: while we all know that paying taxes helps society run (relatively) smoothly, few people enjoy doing it. It can be difficult to file your taxes in Canada, whether you do it yourself or hire a professional, and it can be painful to see some of your hard-earned money go from your bank account.
The good news is that, aside from contributing to RRSPs or TFSAs, there are costs you can deduct from your taxes this year, as well as credits that will save you money!
When it comes to taxes, there is no such thing as a one-size-fits-all solution. That is why the CRA provides over 400 tax deductions and credits to Canadian taxpayers. There’s a credit or deduction for you no matter what your tax status is.
Important Points to Remember
1. Before any credits are applied, tax deductions are utilized to lower your income.
2. Non-refundable tax credits reduce your tax liability but do not result in a refund.
3. Even if you don’t owe any taxes, refundable credits can result in a tax refund.
Difference Between Tax Deductions And Credits
While both tax deductions and tax credits can help you save money on your taxes, they are not the same thing.
Tax deductions are amounts deducted from your total income in order to reduce your taxable income. This implies you’ll pay taxes on a smaller portion of your income. Self-employed business expenses are an example.
Tax credits are sums of money that help you pay less tax on your taxable income. Some are refundable, while others are not.
- Non-refundable tax credits: These can be used to decrease your tax liability to zero, but you can’t get a refund on them. The charitable tax credit is an example of a non-refundable credit.
- Refundable tax credits: These credits assist you to earn a refund if the total of these amounts is greater than the amount of tax owed, or if there is no tax due because the deductions have lowered it to zero. The (GST/HST) credit is an example of a refundable tax credit.
1. GST/HST Credit
The GST/HST Credit (Goods and Services Tax/Harmonized Sales Tax Credit) is a refundable tax credit for households with children. Its purpose is to assist low- and moderate-income Canadians in reducing the amount of tax they pay on consumer goods and services.
The GST/HST credit is distributed quarterly by the Canada Revenue Agency. In most circumstances, all you have to do is pay your taxes on time each year to earn the GST/HST credit, even if you have no income to record.
2. Ontario Trillium Benefit
The Ontario Trillium Benefit may be available to Ontarians (OTB). The Opportunity Tax Benefit (OTB) is a refundable tax credit that helps low-income families pay for energy, sales tax, and property taxes. It is a payment that combines three tax credits into one:
- The Ontario Energy and Property Tax Credit (OEPTC)
- The Ontario Sales Tax Credit
- And the Northern Ontario Energy Credit
Your eligibility is based on your family’s net income from the previous tax year.
3. Charitable Tax Credit
When you donate to charity, you may be eligible for tax incentives. Anyone who makes a charitable donation to a qualified donee (a registered charity) is eligible for the charitable donation tax credit.
4. Self-Employment Expenses
The CRA permits you to deduct a variety of business costs on your tax return, whether you are entirely self-employed or have full-time work, and make self-employed income on the side.
Your expenses could range from a few dollars to hundreds of dollars, depending on your style of self-employment. It’s critical to declare all of your business-related costs on your tax return, regardless of the amount. You’re not only minimizing your tax bill, but you’re also assembling the most accurate picture of your company’s overall health. The following are the most common expenses for self-employed taxpayers:
- Vehicle expenses
- Bank fees
- Office supplies
- Business-use-of-home expenses
- Cell phone
5. Work from Home Expenses
The work from home tax credit is a popular credit that the CRA has been offering since 2020, following a boom in remote labor due to the pandemic.
For the tax year 2021, the CRA will allow all employees who worked from home to claim up to $500 in employment expenditures at a flat rate, up from $400 last year.
If your employer signs the new T2200-s “Declaration of Conditions of Employment for Working at Home Due to COVID-19,” you may be entitled to claim more than the flat rate account. This form details the expenses you can claim as well as any reimbursements you’ve received.
6. Canada Workers Benefit
The Canada Workers Benefit (CWB) is a refundable tax credit that is available to low-income workers. You might be eligible for additional benefits, such as the disability supplement. To be eligible, you must earn at least $3,000 each year. Each province, however, has a separate maximum income level.
The amount you receive from CWB is determined by two factors: where you live and whether you are single or have a family.
7. Registered Retirement Savings Plan (RRSP) Deduction
When you deduct your RRSP contributions from your gross income, your net income is reduced, and you pay less tax.
You don’t have to deduct all of your contributions in the same year to save the maximum money on taxes. Instead, you can deduct only the amount necessary to lower your tax bill or receive the largest refund possible. You can then carry over any donations that were not deducted to the following years when you may earn more money.
8. Home Buyers’ Amount
The Home Buyers’ Amount (HBA) is a tax credit that is not refundable. If you or your spouse or common-law partner bought a qualifying house in Canada in the preceding year, you can claim a tax credit of up to $5,000, which will lower your federal tax bill.
The caveat is that you must be a first-time house buyer, which is defined by the Canada Revenue Agency (CRA) as someone who has not lived in another home owned by you or your spouse in the year of the purchase or any of the previous four years.
9. GST/HST Residential Rental Property Rebate
You may be eligible for the Residential Rental Property Rebate if you’re a landlord who recently purchased a new residential rental property. On a purchase of a new or significantly renovated housing complex in a residential building, this rebate may allow you to claim some GST and/or the federal percentage of HST.
The initial residents of a new residential rental property must be renters; the landlord cannot be among the first occupants.
10. Moving Expenses
Did you know that if you moved more than 40 kilometers for employment, you might be able to deduct your moving costs?
- If you moved and established a new house to work or run a business in a new area.
- You relocated to pursue a full-time post-secondary education at a university, college, or other educational institution.
11. Climate Action Incentive
You can apply for the Climate Action Incentive if you live in Saskatchewan, Manitoba, Ontario, or Alberta (CAI). The CAI helps to offset the fuel surcharge that these four provinces levy on your gas (whether it’s in your heating bills or at the pump).
You can only get one credit per household, and the amount you get is determined by the number of people in your family.
If you live in British Columbia, you can apply for the BC Climate Action Tax Credit, which is granted along with your GST/HST Tax Credit and assists low-income individuals and families in reducing their carbon taxes.
12. Home Accessibility Tax Credit
The Home Accessibility Tax Credit may be available for renovations that make homes safer or more accessible for elders or the disabled (HATC). You can claim up to $10,000 in expenditures if you are a senior, have a valid disability tax certificate, or are supporting an eligible individual.
13. Medical Expenses
Medical bills can quickly mount up over the course of a year. You might get a tax credit for everything from routine dentist appointments to medicines to doctor’s costs.
It’s normally ideal to have one spouse claim all medical expenses for the immediate family (you, your spouse, and any children under the age of 18) and any dependents you support to get the most out of your claim.
The following are some medical expenses that are frequently overlooked:
- Premiums for private medical insurance
- Tutoring for kids with special needs
- Renovations to the home that improve mobility or access
- Expenses associated with traveling to a medical facility for treatment (over 40 km one-way)
- Contact lenses or glasses with a prescription
- Dental implants and dentures
14. Canada Child Benefit
Raising a family can be rather costly. Every dollar counts when you’re spending a large amount of your take-home pay on child care, programs, or medical bills. The Canada Child Benefit (CCB) is a tax-free monthly payment to qualifying families to assist with the costs of parenting children under the age of eighteen. The child disability benefit, as well as any related provincial and territory programs, may be included in the CCB.
You can review dates and payment amounts for benefit programs using CRA My Account. You may simply check the status of your benefit payments, tax refund, and documentation submitted to the Canada Revenue Agency.
15. Child Disability Benefit
The Child Disability Benefit (CDB) is a tax-free monthly payment for families caring for a child under the age of 18 who has severe and long-term impairment in physical or mental functions.
To apply for the child disability benefit, follow these steps:
- You must be a child benefit recipient in Canada.
- The disability tax credit must be available to your child.
Please note: You do not need to apply for the CDB if you currently get the Canada Child Benefit (CCB) for your child who is eligible for the Disability Tax Credit (DTC), because you will receive it automatically.
16. Child Care Expenses
Child care expenses paid to day nurseries and daycare centers, caregivers such as nannies and babysitters, overnight boarding schools, and camps that include lodging, day camps, and day sports schools are all tax-deductible.
The expenses can only be claimed by certain people. Only the spouse or common-law partner with the lowest net income can claim child care expenses in a two-parent home, for example. So, before you file your taxes, double-check the requirements.
17. Canada Caregiver Credit
Do you provide financial assistance to a spouse or common-law partner, as well as a dependent with a physical or mental disability? If so, you may be eligible for the Canada Caregiver Benefit (CCC), a non-refundable tax credit.
The amount you can claim is determined by your relationship with the person for whom you’re claiming the CCC, your circumstances, the person’s net income, and whether or not you’re claiming other credits for that person. Every year, the amounts alter.
18. Disability Tax Credit
The Disability Tax Credit (DTC) is a non-refundable credit that can help you save money on your taxes. It was established to help people cope with the increased costs of living that come with having a disability. To be eligible for the DTC, you must have a significant and long-term physical or mental impairment. Depending on the circumstances, you may be able to claim this credit for yourself or on behalf of a dependent, spouse, or common-law partner.
19. Tuition Tax Credit
Every dollar saved is becoming increasingly crucial as the cost of post-secondary education in Canada continues to rise. Students should take advantage of the tuition tax credit because of this.
The tuition tax credit is available for most tuition expenses at Canadian colleges and universities that exceed $100. These must, however, be paid by you or a member of your immediate family. You cannot claim the credit if your company pays or reimburses you without putting the amount in your compensation. It’s the same if it’s your parent’s boss.
20. Student Loan Interest
The interest paid on a student loan is a credit that is frequently forgotten. The CRA offers a deduction for qualified student loan interest payments to help students and graduates offset some of the financial burdens of repaying student loans.
Maintain in mind that any unclaimed student loan interest can be carried forward to any of the next five years if you keep your records in order.
Move Forward With AG Group!
Take steps to protect yourself from phishing and other forms of fraud that may lead to identity theft or financial fraud as tax season approaches. You will never receive an email with a link that you have not requested, or receive a request for personal or financial information via email or text message, nor will you receive a request for payments by prepaid credit card.
It is natural to be confused about tax deductibles if you are a taxpayer in Canada. In order to smoothly complete your tax filing process and get your due returns, hire AG Group Enterprise Inc. We have been providing tax help, investment advice, and business advice for over a decade and have the skills and knowledge required to help you through the ordeal of tax filing.
With AG group’s help, you can protect the future of your family and your finances.