We all hate tax time, but there are many ways to minimize your tax bill or get a bigger tax refund.
Unfortunately, most people don’t take advantage of the tax deductions and credits available to them, hindering their ability to achieve financial independence.
In this guide, we’ll show you what you can claim on your taxes in Canada so you can maximize your tax return before the May 1st, 2023, deadline.
How to maximize your tax return in Canada
To maximize your tax return, calculate how much tax you need to pay on your income, then claim any tax deductions and credits you are entitled to.
Below we will look at how you can save on taxes in Canada and increase your tax refund by taking advantage of benefits, deductions, credits, and tax breaks available to you.
Tax deductions: what is tax deductible in Canada?
Tax deductions lower your taxable income, reducing the tax payable. The amount you can save depends on your federal tax bracket, which varies based on your income.
Here are some of the best deductions you can use.
1. Childcare expenses
You can claim childcare expenses to lower your net income, reducing the taxes you have to pay. The amount varies based on the child’s age, and a higher limit may be available for children with disabilities.
Child care expenses include payments to:
- Child care providers
- Day nursery schools and daycare centres
- Day camps and day sports schools that provide a sufficient degree of child care services
- Educational institutions providing child care services
- Overnight boarding schools or camps or sports schools where lodging is involved.
You can even employ a nanny and deduct the cost from your taxable income. Expenses relating to finding a child care provider and registration fees may also qualify.
From personal experience, daycare centres in Ontario automatically supply a tax receipt when it’s tax season.
2. Support payments
If you make child support payments or support payments to a current or former spouse or common-law partner, this amount can be deducted from your income on your tax return.
3. Medical expenses
Canadians can benefit from a federal and provincial/territorial non-refundable tax deduction by claiming medical expenses, such as medicines, medical aids, dental care and medical-related travel expenses.
You can claim the medical expense tax credit if your family’s total medical expenses are either three percent of your net income or $2,479 (whichever is less). The provincial/territorial credit requirements vary depending on where you live.
You can claim expenses paid for yourself, your spouse or partner and children under 18. You can also claim expenses for family members you support, such as grandparents, siblings, nieces, and nephews. However, only the costs that exceed 3% of your dependant’s net income or maximum threshold count.
4. Vehicle expenses
If you use your vehicle for your job or to earn income, you can claim a tax deduction on vehicle-related expenses. You can claim gas, licence and registration fees, maintenance, repairs, insurance and leasing costs. You can also claim the interest paid on a vehicle loan.
Deductible expenses depend on your vehicle type, whether you buy or lease your vehicle, and how much you use it for work. If you use it for business and personal use, you can deduct the portion used for business purposes.
Record all your business travel. Use a log book or mileage tracker app, which should include the date, purpose of the journey, destination, and distance covered. Make sure you keep receipts for all your expenses.
If purchasing a vehicle solely for business use, you can claim Capital Cost Allowance (CCA), which allows you to deduct the depreciating cost of the asset up to a certain limit.
5. Make RRSP contributions to lower your taxable income
Contributing to your Registered Retirement Savings Plan (RRSP) is a great way to make some massive tax savings and receive a bigger refund, especially for those on a high income.
Any contributions you make toward your RRSP can be deducted when filing your taxes for the previous year. For example, if you make an RRSP contribution of $2,000, your income for tax purposes is reduced by $2,000.
Try this RRSP tax savings calculator to see how much you could save.
The RRSP contribution limit is 18% of your earned income from the previous year, up to a maximum of $29,210. Log in to your CRA My Account or use the MyCRA mobile app to check your RRSP deduction limit. You can also find this information on your latest notice of assessment (or reassessment).
The deadline to contribute to your RRSP for the 2022 tax year is March 1, 2023. The amount is applied to next year’s taxes if you contribute after this date.
For lower tax brackets, contributing to a Tax-Free Savings Account (TFSA) might be a better option.
6. Minimize capital gains tax
Capital gains refer to the profit you make when you sell something, like investments, property, land or business assets. For example, if you buy an asset for $1,000 and sell it for $1,500, you have a capital gain of $500.
In Canada, 50% of any capital gain is taxable, but you can reduce the amount of tax you pay by using tax-free or tax-sheltered accounts like a TFSA or an RRSP.
You can also help reduce your tax burden by offsetting capital gains with capital losses. Lastly, track expenses for investing-related fees to increase the adjusted cost basis of investments and minimize capital gains tax.
7. Property taxes
If you’re a landlord, you can claim property taxes for the period that the rental property was available for rent by completing Form T776.
8. Home office expenses
You can claim a portion of eligible home office expenses, such as rent, electricity, internet, cell phone bills and office supplies.
If you use your home for work or business purposes, you can claim a portion of your rent as a home office expense, regardless of whether you are employed or self-employed.
Commissioned employees can claim extra home office expenses, such as property taxes, home insurance and equipment leases.
9. Employment expenses
Some expenses are tax deductible if required to earn employment income, as long as your employment contract says you have to pay them and you didn’t receive an allowance for them.
10. Self-employed business expenses
If you are self-employed, you can deduct business-related expenses. Eligible expenses include start-up costs, advertising, insurance, interest payments, bank charges, professional fees, rent supplies, and other business-related expenses.
11. Union and professional dues
Many union dues and professional membership dues are tax-deductible, such as yearly union dues, professional board dues, premiums for insurance and professional membership dues.
12. Moving expenses
You can claim moving expenses if you moved at least 40km closer (by the shortest public route) to your workplace, new business location or post-secondary educational institution.
Many eligible moving expenses can be deducted, including:
- Transportation and storage costs such as packing, movers, and in-transit storage.
- Travel expenses relating to moving to your new home, including vehicle expenses, meals, and accommodation.
- Temporary living expenses for meals and temporary lodging.
- Costs for cancelling your old lease.
- Costs for changing and replacing documents.
- Utility hook-ups and disconnections.
- Costs to maintain your vacant home after the move (up to $5,000).
13. GST/HST New Housing Rebate
If you have bought a new or renovated home, or a substantially renovated one, you may be eligible for the GST/HST New Housing Rebate to recover some of the GST/HST paid. There’s also a rental property rebate available.
14. Deduct interest for borrowing to invest
If you’ve borrowed money to invest, you can deduct the interest you pay on that loan from your taxes as long as the interest rate is reasonable.
You must use the money to earn income from a business or property. Income from interests, dividends, rents, and royalties are allowed. Income earned from employment is not classified as business income.
You must pay the interest during the year you are claiming the deduction and have a legal obligation to pay the interest.
15. Reduce tax deductions at source
If you are employed, your income tax is deducted at source. Your employer withholds this tax without considering any deductions you might be eligible for.
You can reduce the amount of tax your employer takes by updating your TD1 2023 Personal Tax Credits Return, which tells your employer which tax credits should be used to calculate your payroll deductions.
The best way to reduce your taxes at source and avoid waiting for a tax refund is to use the CRA’s T1213 Request to Reduce Tax Deductions at Source form.
Ask for reduced tax deductions at source for any deductions, credits, or non-refundable tax credits not included on the Personal Tax Credits Return, such as childcare expenses, contributions to your RRSP, employment expenses and charitable donations.
This way, more money stays in your pocket, and you’re not lending money to the government at zero percent interest.
Tax credits: non-refundable and refundable tax credits
A tax credit is a tax incentive that reduces the amount of tax paid dollar-for-dollar.
A non-refundable credit is only helpful if you owe money. If taxes are owed, these credits can be used to reduce the amount you owe.
You receive a refundable tax credit even if you don’t owe any taxes.
1. Basic personal amount
The basic personal amount is a tax credit that all Canadians can claim. This is the amount of income you can earn without paying taxes. The maximum BPA is $14,398 for the 2022 taxation year and $15,000 for the 2023 taxation year. This amount is indexed for inflation for subsequent years.
2. Spousal amount
The spousal amount is a non-refundable credit that can be claimed by individuals who support their spouse or common-law partner whose net income was less than the basic personal amount ($14,398 in 2022).
3. Age amount
Claim the age amount if you were 65 or older on December 31, 2022, and your net income is less than $92,480.
4. Student loan interest
If you have government student loan debt, you can claim the interest you paid on the loan as a non-refundable tax credit when you file your income tax return. This credit lowers your federal tax bill but cannot be used to get money back as a tax refund.
You can only claim student loan interest paid in the last five years by you or someone related to you. You must have received the loan under:
- the Canada Student Loans Act
- the Canada Student Financial Assistance Act
- the Apprentice Loans Act
- provincial or territorial government laws similar to the acts above.
Interest costs for private student loans, such as personal loans, are not eligible.
If you don’t owe any taxes this year, it’s better not to claim the interest and use it as a credit in future tax years.
5. Canada Workers Benefit (CWB)
You can claim the Canada Workers Benefit (CWB) when filing taxes. It’s a refundable tax credit to help individuals and families working and earning a low income.
You can receive up to $1,428 for single individuals and up to $2,461 for families.
You may also be eligible for the disability supplement if you are eligible for the Disability Tax Credit and have an approved Disability Tax Credit Certificate on file with the Canada Revenue Agency.
6. Canada Caregiver Credit (CCC)
The Canada Caregiver Credit (CCC) is a non-refundable tax credit you can claim if you support a spouse, common-law partner or dependent with a physical or mental impairment.
7. Disability Tax Credit (DTC)
The Disability Tax Credit (DTC) is a non-refundable tax credit that can lower the taxable income that people with disabilities or their supporting family members have to pay.
To qualify, a medical practitioner must certify that you have a severe and prolonged impairment. If you previously qualified for the DTC but didn’t claim it, you can claim it retroactively for up to 10 years.
8. Amount for an Eligible Dependant Credit
The Amount for an Eligible Dependant Credit is a tax credit for single adults who financially support a relative. Single and separated parents without support from the other parent may also be eligible.
This credit is not available if you are claiming the Spouse or Common-Law Partner Amount tax credit.
9. Tuition expenses
In Canada, a course qualifies for a tuition tax credit if you paid more than $100 in tuition fees to a post-secondary institution.
If you’re over 16 and taking courses to improve your skills in your occupation, you qualify for tuition credits if the educational institution is certified by Employment and Social Development Canada.
You must receive a tax certificate or receipt from your school stating the fees you paid for the year.
10. Charitable credits
If you make charitable donations, you can claim a charitable tax credit when you file your income tax return.
11. Home Buyers’ Amount
If you bought your first home in 2022, you could claim up to $10,000 as a non-refundable credit on your federal tax return if you haven’t lived in another home owned by you (or your spouse or common-law partner) in the last four years.
If you bought your home in 2021 or earlier, you could claim up to $5,000.
12. Canada Training Credit
The Canada Training Credit (CTC) is a refundable tax credit that can be used toward eligible training fees. If you’re over 26, you can get $250 every year (up to $5,000 in a lifetime) to fund eligible tuition fees and the costs of other courses.
13. Provincial and territorial tax credits
Provincial and territorial governments have their own tax laws and credits, so check your province or territory to find out what you are entitled to.
Claim tax breaks for previous years
If you didn’t claim tax deductions or credits for the previous tax year, you could claim them this year. For example, if you didn’t include capital losses, tuition credits or last year’s RRSP contributions, include them this year to get a bigger refund.
There are also many ways to save more money by taking advantage of family benefits.
The GST/HST credit is a tax-free quarterly payment provided by the Canada Revenue Agency to help families with low to modest income offset the sales tax paid on consumer goods and services. Simply complete your tax return on time to receive the GST/HST credit, even if you have no income to report.
The Canada Child Benefit (CCB) is a tax-free monthly payment to help with the cost of raising children under the age of 18. Payment amounts depend on how many children you have and your adjusted net family income from the latest filed tax year.
CCB payments are not taxable, so you don’t need to report them on your tax return. You must file your tax return with your spouse or common-law partner to receive the CCB. For single parents, the one with custody receives the benefit. If custody is shared, the benefit is split equally or as per the custody arrangement.
Families earning less than $90,000 per year can apply for the Canada Dental Benefit to receive a tax-free payment for any child under 12 years old that does not have access to a private dental insurance plan.
If you made it to the end, congratulations on learning how to get more money back on taxes in Canada.
For more information on how you can save on taxes, seek help from an accountant or a financial advisor.
Tax return FAQs
When is the tax return deadline in Canada?
The tax return deadline in Canada is May 1st, 2023, since April 30th is a Sunday.
What is the maximum tax refund you can get in Canada?
In Canada, there is no maximum tax refund. It depends on various factors, such as earned income, eligible expenses, deductions, and credits.
Tax credits vs tax deductions
Tax deductions can help you lower your taxable income, whereas tax credits provide better tax benefits as they reduce the amount of tax owed dollar-for-dollar.
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