No sooner have you navigated the RRSP contribution deadline, then another key date looms into view – your annual income tax return. If only the world was so keen to remind you to watch movies or take a vacation!
Even if you have a professional helping you do them, tax returns can be as welcome as a raccoon on your front porch, but they can also be golden chance to lessen your family’s tax burden.
First, the basic but crucial question: when are they due? April 30 is the deadline to file a tax return for most Canadians, although if you or your spouse or common-law partner is self-employed, the tax-filing deadline is extended to June 17. Any balance owing to the CRA must be paid by April 30.
The fundamental benefit is the basic tax exemption. At Federal level, for the 2023 year, the maximum you can claim is $15,000, which is the amount at which you will start to be taxed. At both provincial and federal level, subsequent income tax thresholds are adjusted for inflation and, therefore, increased for both tax years 2023 and 2024. For example, the federal tax rate of 33% begins at income over 235,675 for tax year 2023 but has gone up to $246,752 for 2024. See the CRA website for full details.
Credit or deduction?
A simple but important distinction. A tax deduction happens before the tax calculation and reduces your total income. A tax credit, however, is applied to the final amount to reduce your tax bill.
There are dozens and dozens of deductions and credits that residents can claim but, as the clock click downs towards deadline day, here are some – minus the obvious registered account deductions - that you may need to add to your personal checklist.
Credits
First-Time Home Buyers’ Tax Credit
If 2023 was a big year for you and you bought your first home, huge congratulations. In the current market as well. Outstanding. But wait, further good news. You may be eligible to claw back some of that significant outlay back. If you (or your spouse or common-law partner) acquired the home in 2023 and did not live in another home you owned in any of the four preceding years, you can claim up to $10,000 of the purchase price, with potential tax savings of up to $1,500.
Canada Training Credit
Do you have a love of learning? Did you complete a course at a Canadian post-secondary institution in 2023? Are you between the ages of 26 and 66? You may qualify to claim 50% of eligible tuition and training fees. Those who wrote an occupational examination for a professional status or licence may also qualify. Sounds obvious but you can’t claim this if your employer or government have already covered it.
Medical expenses
Your medical expenses coverage likely goes only so far but you may have a chance to claim some of it back if it was bought for you, your spouse or common-law partner. Eligible expenses may include ambulatory or laboratory services, or even laser eye surgery, or egg and sperm freezing fees. For a full list, click here.
Charitable donations
According to H&R Block, Canadians on average donate $340 per year to the charity of their choice. This charitable sentiment does not simply end there, however. At the federal level your non-refundable tax credit will be 15% of the first $200 of donations and 29% on additional donations. At provincial level, the credits range from 4% to 20%. The maximum donation credit you can claim is 75% of your net income for the year.
Other credits to check: Digital News Subscription Tax Credit; Canada Child Benefit; Disability Tax Credit; Canada Carbon Rebate (CCR); Canada Caregiver Credit; Federal Political Contribution Tax Credit.
Deductions
First Home Savings Account
This was introduced in 2023 and is designed to help those who qualify save solely for the purpose of purchasing a home. Investments within this registered account grow tax free, while contributions are tax deductible, similar to an RRSP. However, unlike an RRSP but similar to a TFSA, withdrawals are also tax free. The FHSA has an annual limit of $8,000 and a lifetime maximum contribution of $40,000. The deadline for 2023 contributions was December 31.
It’s worth noting the comparison to the Home Buyers’ Plan provision contained in an RRSP. While an RRSP HBP allows you remove money without a tax hit, the withdrawn money has to be repaid back over the next 15 years. There are no repayment requirements with the FHSA.
Any Canadian resident between the ages of 18 and 71 qualifies for a FHSA, provided you have not owned a home in the past four calendar years.
Capital losses
Last year was not a winner for every investment but if you experienced a capital loss, you might be able to deduct that loss against your capital gains to help decrease your tax bill. For example, the income inclusion rate for capital gains is 50%, after which it gets taxed at your marginal tax rate. A capital gain of $20,000 would result in $10,000 of it being taxed at a marginal rate of, let’s say, 35%. The tax bill would, therefore, be $3,500. The selling of non-registered assets and investments that have dropped in value can offset that bill.
Tax-loss harvesting can get complicated so consult your Q Wealth advisor for more details.
Work-from-home expenses
It’s important to note that the work-from-home flat rate brought in for 2020, 2021 and 2022 no longer applies. However, if you work from home and have signed a Declaration of Conditions of Employment (Form T2200) from your employers, you may still qualify to deduct business-related expenses.
Moving expenses
Fled the city for a quieter life? Finally moved into your dream house? You may qualify for moving expenses. These could include the following: transportation and storage costs; temporary living expenses for a maximum of 15 days; cost of cancelling your lease; and costs of selling your old home, including advertising and real estate commission. The crucial part is keeping all receipts and documents to support your claim.
Other deductions to check: Disability supports deduction; Canadian Armed Forces personnel and police deduction; Deduction for elected split-pension amount; Annual union, professional or life dues.
As your life changes and events happen, various possibilities to reduce your tax bill may open up. A list of all possible credits, deductions and expenses can be found here but speak to your advisor to make sure you explore all relevant avenues.