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Popular Canadian Tax Deductions and Credits in 2023

How Many of These Were You Aware Of (and How Many Can You Claim?)

Although the deadline to file is still months away, smart Canadians are already thinking about filing their taxes, and ways in which they may be able to reduce their tax bill and/or maximize any refund they might be entitled to.

What they might not be thinking of – because they may not be aware of them – are ALL of the tax deductions and tax credits they might be eligible for, especially as some are far less publicized (and understood) than others. The most common of these are what we are going to take a closer look at here.

Before we do, a quick note. While tax deductions and tax credits both help improve your tax outcome, they are actually different and not interchangeable.

Tax deductions are amounts you subtract from your total income, making your taxable income lower. This means you’d be charged taxes on a smaller amount of income. An example would be self-employed business expenses.

Tax credits are amounts that reduce the tax you pay on your taxable income. Some are refundable and some aren’t.

Non-refundable tax credits: You can use these to reduce your tax payable to zero, but you can’t claim a refund based on these amounts. An example of a non-refundable credit is the charitable donation tax credit.

Refundable tax credits: When the total of these amounts is more than the amount of tax due, or if there is no tax due because the deductions have reduced it to zero, these credits help you get a refund. An example of a refundable tax credit is the (GST/HST) credit which is a refundable sales tax issued outside of your income tax return.

Now back to those common perks you might be missing out on:

GST/HST Credit

The Goods and Services Tax/Harmonized Sales Tax Credit (GST/HST Credit) offers families with kids a refundable sales tax credit. It aims to assist Canadians with low to moderate incomes in reducing the tax they pay on consumer goods and services.

The GST/HST credit is disbursed by the Canada Revenue Agency every quarter. Most of the time, even if you have no income to declare, all you need to do to be eligible for the GST/HST credit each year is submit your taxes on time.

In its new Affordability Plan, the CRA proposes doubling this benefit for six months in 2022.

Charitable Tax Credit

You can get tax advantages for your charitable contributions when you make them. Anyone who makes a donation to an eligible donee is eligible for the charitable donation tax credit (i.e. gives to a registered charity).

Self-Employment Expenses

The CRA permits you to write off a variety of company expenses on your tax return, regardless of whether you are totally self-employed or work a full-time job and generate self-employment income on the side.

Your expenses could range from a few dollars to hundreds of dollars, depending on the type of self-employment you have. It’s crucial to list all of your business-related costs on your tax return, regardless of how much they were. You not only reduce your tax liability but also create the most accurate picture of the state of your business as a whole. For taxpayers who are self-employed, the most typical expenses are:

  • Advertising
    Vehicle costs
    Bank charges
    Office equipment
    Business use of home expenses
    Mobile phone

Work From Home Expenses

The Work from Home Tax Credit is an extremely popular credit that the CRA implemented starting in 2020 in response to the boom in remote work brought on by the pandemic.

For tax year 2021, the CRA increased its flat-rate allowance for all employees who worked from home from $400 to $500.

If your employer signs the new T2200-s, “Declaration of Conditions of Employment for Working at Home Due to COVID-19,” you might be eligible to claim more than the flat rate account. This form details all of the expenses you may deduct as well as any reimbursements you may have received.

Registered Retirement Savings Plan (RRSP) Deduction

Your net income is decreased by deducting your RRSP contributions, which results in a lower overall tax burden.

You don’t have to deduct all of your contributions in one year in order to benefit from the greatest tax savings. Instead, you can take only the deductions necessary to lower your tax liability or maximize your refund. Any payments that weren’t deducted can then be carried over to years in which you might be earning more money and claimed as a deduction.

Home Buyer’s Amount

A non-refundable tax credit, the Home Buyers’ Amount (HBA), is available to some home buyers. You may be eligible for a tax credit of up to $5,000 if you or your spouse or common-law partner bought a qualifying house in Canada in the previous year. This credit will lower the amount of federal tax you must pay.

The only catch is that you must be a first-time house buyer, which the Canada Revenue Agency (CRA) defines as a person who has never lived in another property owned by you or your spouse in the year of the purchase or in any of the four years prior.

GST/HST Residential Rental Property Rebate

You might be qualified for the Residential Rental Property Rebate if you are a landlord who just purchased a new residential rental property. With the help of this rebate, you may be able to deduct some GST and/or the federal portion of HST when you buy a brand-new or significantly refurbished housing complex in a residential building.

One caveat: the first inhabitants of the newly offered residential rental property must be renters; the landlord shall not be among the first residents.

Moving Expenses

Did you know that you may be able to recover your moving expenses if you moved more than 40 kilometres for work? If any of the following apply, you can claim qualified moving expenses:

You relocated and set up a new residence in order to start a new job or business, or you moved so that you could enroll in a post-secondary program full-time at a university, college, or other educational facility.

Travel expenditures, license replacement fees, and utility hook-up fees are all considered eligible expenses.

Climate Action Incentive

Those of us who live in Ontario can claim the Climate Action Incentive (CAI). The CAI helps offset the fuel charge that 4 provinces – Saskatchewan, Manitoba, Ontario or Alberta- add directly to the cost of your gas (whether it’s heating bills or at the gas station).

You’re only allowed one credit per household and the amount you receive is based on the size of your family.

Home Accessibility Tax Credit

The Home Accessibility Tax Credit may be used for improvements that make houses safer or more accessible for elderly people or people with disabilities (HATC). You may deduct up to $10,000 in costs if you are over 65, have a valid disability tax certificate, or are providing support to someone who qualifies.

Medical Expenses

Medical expenses can add up quickly in the run of a year. Everything from routine dental visits to prescriptions to doctors’ fees could earn you a credit at tax time.

To get the most out of your claim, it’s usually best to have one spouse claim all the medical expenses for the immediate family (you, your spouse, and kids under 18) and any dependents you support.

Some overlooked medical expenses include:

  • Private medical insurance premiums
    Tutoring for children with disabilities
    Home renovations that improve mobility or access
    Travel expenses to seek medical treatment (over 40 km one-way)
    Prescription contact lens or glasses
    Dentures and dental implants

Canada Child Benefit

Every parent knows that raising a child can be very expensive. With a significant portion of your take-home income being spent on child care, programs or medical expenses, every dollar counts.

The Canada Child Benefit (CCB) is a tax-free monthly payment made to eligible families to help with the cost of raising children under 18 years of age. The CCB might include the child disability benefit and any related provincial and territorial programs.

When it comes to child care, you can claim tax-deductible child care expenses paid to day nursery schools and daycare centers, caregivers such as nannies and babysitters, overnight boarding schools and camps that provide lodging, day camps and day sports schools.

There are limitations on who can claim the expenses. For example, in a two-parent household, only the spouse or common-law partner with the lower net income can claim child care expenses. So make sure to review the requirements carefully before filing your taxes.

Canada Caregiver Credit

Do you support a spouse or common-law partner, or a dependent with a physical or mental impairment? If so, the Canada Caregiver Credit (CCC), a non-refundable tax credit, may be available to you.

The amount you can claim depends on your relationship to the person for whom you are claiming the CCC, your circumstances, the person’s net income, and whether other credits are being claimed for that person. The amounts also change every year.

Disability Tax Credit

Designed to offset the extra living costs related to having a disability, the Disability Tax Credit (DTC) is a non-refundable credit used to reduce your taxes owed. In order to qualify for the DTC, you must have a serious and prolonged physical or mental impairment. Depending on the situation, you may be able to claim this credit for yourself, or on behalf of your dependent, spouse or common-law partner.

Tuition Tax Credit

As the cost of post-secondary education in Canada continues to climb, every dollar saved becomes increasingly important. That’s why students should take advantage of the tuition tax credit.

Most tuition fees for Canadian colleges and universities in excess of $100 are eligible for the tuition tax credit. However, these must be paid by you or someone from your immediate family. If your employer pays or reimburses you without including that amount in your pay, you can’t claim the credit. The same applies if it’s your parent’s employer.

Student Loan Interest

Interest paid on a student loan is an often-overlooked credit. To help students and graduates offset some of the financial burden of repaying student loans, the CRA offers a deduction for qualifying student loan interest payments.

You can carry forward any unclaimed student loan interest to any of the next five years, so be sure to keep those documents in order.

These are actually just some of the tax deductions and tax credits that are available for the coming tax year. The CRA itself actually lists more than 400 of them. That’s why for thoe with more complicated personal tax returns – and certainly those with business tax returns – relying on a software to find everything you might be entitled to is not always the best idea Having a professional accountant prepare your taxes for you will, and as an added bonus we’ll do all the boring form filling, saving you time too!