CRA Tax Benefits to Save THOUSANDS in Canada!

One of the quickest ways you can grow your bank account in Canada is by spending less on taxes. 

The government refunded over $30 billion to Canadians for the returns received from February to June in 2024. 

And only 18% of Canadians feel like they understand the tax credits and benefits they may be entitled to, according to this H&R block survey.

This shows that there are lots of opportunities for tax refunds and deductions that can save you thousands of dollars, and I’ll go over some major ones that you might not have known about.

I’m not going to be talking about super obvious tax deductions that you probably already know about, like contributing to your RRSP. I’m only going to be talking about little-known ones that you might not have heard about, and that can actually move the needle in terms of hundreds or thousands of dollars in tax savings. Let’s start with the first one, which is: 

Moving Expenses

Moving expenses are costs incurred when you move to a new home to be closer to your place of work or to attend a post-secondary institution full-time. These expenses can be deducted from your income, which is something I didn’t know about the first time that I moved! I missed out on at least hundreds of dollars of tax savings. I’ll explain how it works:

How Do Moving Expenses Work?

1. Eligibility: To be eligible to claim moving expenses, you must:
   • Move at least 40 kilometers closer to your new work or school location.
   • Be moving within Canada.
2. Eligible Expenses: These can include:
   • Transportation and storage costs (e.g., movers, truck rental).
   • Travel expenses (e.g., gas, meals, and accommodations).
   • Temporary living expenses for up to 15 days.
   • Costs associated with selling your old home (e.g., real estate commissions).
   • Costs of buying your new home (e.g., legal fees, taxes).

Practical Example

Meet Emma. Emma moved 300 kilometers for a new job and incurred the following expenses:

• Moving company: $1,200
• Travel expenses: $300
• Temporary living expenses: $500
• Real estate commission for selling old home: $6,000

For a total of $8,000 in expenses.

If Emma’s income for the year was $70,000, her new taxable income after deducting the moving expenses would be $70,000 – $8,000 = $62,000. That is some huge tax savings!

Work From Home Deduction

So many people are working from home these days, that this one is a very important one as it can amount to thousands of dollars in tax savings. To claim the work-from-home deduction, you must have worked from home more than 50% of the time for at least four consecutive weeks, and your employer must not have reimbursed you for all your home office expenses.

You’ll need Form T2200S, filled out and signed by your employer, and to keep all receipts and records of your expenses.

You can claim a portion of expenses like:

• Utilities (electricity, heating, water)
• Internet
• Rent
• Office supplies
• Maintenance and minor repairs

EXAMPLE: 

Measure the size of your workspace and your home to determine the percentage of your home used for work. For example, if your workspace is 200 square feet and your home is 1,000 square feet, your workspace percentage is 20%.

Multiply your total eligible expenses by your workspace percentage. For example, if your total expenses are $5,000 and your workspace is 20%, your claim amount is $1000.

Child Care Expenses

To claim child care expenses, the child must be under 16 years old or have a physical or mental impairment. 

You can claim expenses for:

• Daycare centers and nurseries
• Caregivers (nannies or babysitters)
• Boarding schools and overnight camps 
• Educational Institutions for the portion related to childcare

You CANNOT claim:

• Medical or hospital care
• Tuition for regular schooling
• Recreational activities such as sports or arts classes
• Transportation costs

Claim Limits

The maximum you can claim per child depends on their age and condition:

• Under 7 years: $8,000
• 7-16 years: $5,000
• With a disability: $11,000

Example: Imagine you have two children, ages 4 and 9. In 2023, you spent $6,000 on daycare for the 4-year-old and $4,000 on after-school care for the 9-year-old. Since the maximum allowable deduction is $8,000 for the younger child and $5,000 for the older child, you can claim the full $6,000 and $4,000, totalling $10,000, as a deduction on your taxes.

File taxes on time

File Taxes on Time: About 25% of Canadians missed the tax filing deadline in 2024, leading to unnecessary interest and penalties. 

Filing your taxes on time is crucial for several reasons:

1. Avoid Penalties: Late filing can result in huge penalties and interest charges. The penalty for filing late is 5% of your balance owing plus 1% for each full month your return is late, up to a maximum of 12 months.
2. Receive Benefits: Filing on time ensures you receive important benefits and credits, such as the Canada Child Benefit (CCB) and the GST/HST credit, without delay.

Practical Example

Let’s look at an example with John. John has a tax balance owing of $20,000 and files his tax return three months late with the CRA.

• Late Filing Penalty: 5% of $20,000 = $1,000
• Additional Monthly Penalty: 1% of $20,000 = $200 per month
• Total Penalty for Three Months Late: $1,000 + (3 x $200) = $1,600

John would owe an additional $1,600 in penalties for filing late, not including interest charges. 

Important deadlines:

• Self-Employed: File by June 15th; taxes due by April 30th.
• Non-Self-Employed: File and pay taxes by April 30th.

Medical Expenses

To claim medical expenses, the costs must be incurred for yourself, your spouse or common-law partner, and your dependents.

Some common eligible medical expenses include:

• Prescription medications
• Dental services
• Vision care, including glasses and contact lenses
• Professional services like physiotherapy, chiropractic, and psychological services
• Medical devices and equipment prescribed by a doctor
• And much more, check out the CRA website for the full list

Ineligible Expenses

Not all medical expenses are eligible. For example, you cannot claim:

• Over-the-counter medications
• Health club memberships
• Non-prescription supplements

For 2024, you can only claim expenses exceeding the lesser of $2,759 or 3% of your net income.

Example

Let’s say you have a net income of $60,000 and incurred $3,000 in medical expenses in 2024. The max you can claim is the LESSER of 3% of your net income of $60,000, which is $1,800, or $2,759 for 2024. That means the max you can deduct is $1,800. You can claim the total expenses minus the threshold: $3,000 – $1,800 = $1,200.

FHSA

The First Home Savings Account, or FHSA, might be the best tax deduction out there for a registered account, whether you’re planning to buy a home or not.

The FHSA is a new registered account to help Canadians save for their first home. It combines some of the best features of the RRSP and TFSA, and here’s why I think anyone who qualifies should probably invest in the FHSA before investing in their RRSP:

Why to choose the FHSA over the RRSP and Home Buyers Plan

1. Flexibility: If you don’t buy a home, you can transfer your savings to an RRSP or RRIF without losing tax advantages.
2. No Impact on RRSP Room: Contributions to your FHSA don’t affect your RRSP contribution room.
3. No Repayment Required: Unlike the Home Buyers’ Plan under the RRSP, you don’t have to repay amounts withdrawn from your FHSA when buying a home.

Contributions to your FHSA are tax-deductible, just like an RRSP. 

To qualify, you must:

• Be a Canadian resident.
• Be at least 18 years old.
• Be a first-time homebuyer, meaning you haven’t owned a home in the current year or the previous four years.

Practical Example

Let’s look at Sarah, who is 30 years old and wants to buy her first home in the next five years. She opens an FHSA and contributes $8,000 annually, and her marginal tax rate is 30%.

After five years, Sarah has contributed $40,000. With tax-free growth, her account grows to $50,000. Over five years, she saves $12,000 in taxes. Here’s what happens next:

Scenario 1: Sarah Buys a Home

Sarah withdraws $50,000 from her FHSA completely tax-free for her down payment, significantly boosting her ability to afford her home.

Scenario 2: Sarah Doesn’t Buy a Home

If Sarah hasn’t bought a home in 15 years, she transfers the amount in her FHSA to her RRSP or RRIF tax-free. Her savings continue to grow tax-deferred until she withdraws them.

As you can see, the FHSA is a win-win, whether you buy a home or not!

Canada Child Benefit

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 old. It’s designed to provide more financial support to those who need it most.

How Does the CCB Work?

1. Eligibility: To be eligible for the CCB, you must:
   • Live with a child under 18 years old.
   • Be a Canadian resident.
   • Be the person primarily responsible for the care and upbringing of the child.
   • You or your spouse/common-law partner must be a Canadian citizen, a permanent resident, a protected person, or a temporary resident who has lived in Canada for the previous 18 months.
2. Payment Amount: The amount you receive depends on your adjusted family net income and the number of children you have. The CRA recalculates the benefit every July based on the information in your tax return from the previous year. If your adjusted net family income is above $34,863, your CCB payments will be reduced.

Practical Example

Let’s look at an example with Emma. Emma has two children, ages 5 and 8, and a family net income of $35,000. Based on this income, Emma qualifies for a monthly CCB payment.

The maximum annual benefit per child under 6 is $7,437, and for children aged 6-17, it’s $6,275. Given Emma’s income, she will receive a portion of this amount each month.

Canada Caregiver Credit

The Canada Caregiver Credit (CCC) is a non-refundable tax credit that helps individuals who support a spouse, common-law partner, or dependent with a physical or mental impairment.

How Does the CCC Work?

1. Eligibility: To be eligible for the CCC, you must:
   • Support a spouse or common-law partner or a dependent with a physical or mental impairment.
   • Be responsible for the care and upbringing of the dependent.
2. Eligible Dependents: Dependents can include:
   • Your spouse or common-law partner.
   • Your or your spouse’s/common-law partner’s child or grandchild.
   • Your or your spouse’s/common-law partner’s parent, grandparent, brother, sister, uncle, aunt, niece, or nephew.
3. Credit Amount: The amount of the credit depends on your relationship with the dependent and their net income. The base amount for the CCC is up to $7,999 for each eligible dependent.

Canada Training Credit

The Canada Training Credit (CTC) is a refundable tax credit that helps Canadians cover the cost of work-related training. It’s designed to help you develop skills and improve your employability.

How Does the CTC Work?

1. Eligibility: To be eligible for the CTC, you must:
   • Be a Canadian resident.
   • Be between 26 and 65 years old.
   • Have earnings of at least $10,000 from employment or self-employment, but not more than $150,000, in the previous year.
   • Have filed a tax return for the previous year.
   • Have a Canada Training Credit limit available (starting at $250 per year up to a lifetime limit of $5,000).
2. Claiming the Credit: You can claim the lesser of your Canada Training Credit limit or 50% of your eligible tuition and fees for the year.

Practical Example

Let’s look at an example with Lisa. Lisa earns $50,000 annually and decides to take a course costing $1,000 to improve her skills.

• Credit Calculation: Lisa’s Canada Training Credit limit for the year is $250. She can claim the lesser of $250 or 50% of her $1,000 tuition fees.
• Claimable Amount: 50% of $1,000 is $500, but her CTC limit is $250. So, Lisa can claim $250.

This means Lisa gets $250 back as a refundable tax credit, helping to offset the cost of her training.

Tuition Tax Credit

The Tuition Tax Credit is a non-refundable tax credit that helps students in Canada reduce their income taxes by claiming eligible tuition fees paid for post-secondary education.

How Does the Tuition Tax Credit Work?

1. Eligibility: To be eligible for the Tuition Tax Credit, you must:
   • Be enrolled at a designated educational institution in a qualifying program.
   • Have paid more than $100 in eligible tuition fees for the year.
2. Eligible Expenses: These can include tuition fees for courses taken at post-secondary institutions, as well as certain occupational skills courses.
3. Claiming the Credit: You can claim the amount of your eligible tuition fees to reduce your federal and provincial or territorial income tax.

Practical Example

Let’s look at an example with Sarah. Sarah is a university student who paid $6,000 in eligible tuition fees this year.

• Federal Tax Credit Calculation: The federal tuition tax credit rate is 15%. So, Sarah’s federal tax credit is 15% of $6,000, which equals $900.
• Provincial/Territorial Tax Credit: Each province and territory has its own rate. For simplicity, let’s say Sarah’s province has a rate of 10%. So, her provincial tax credit is 10% of $6,000, which equals $600.
• Total Tax Credit: $900 (federal) + $600 (provincial) = $1,500

Sarah can use this $1,500 to reduce the amount of income tax she owes.

Pension Income Splitting

Pension income splitting allows you to transfer up to 50% of your eligible pension income to your spouse or common-law partner for tax purposes. This can help reduce your overall family tax bill by taking advantage of lower tax rates.

How Does Pension Income Splitting Work?

1. Eligibility: To be eligible for pension income splitting, you must:
   • Receive eligible pension income, such as payments from a registered pension plan, registered retirement income fund (RRIF), or annuity payments.
   • Be married or in a common-law relationship at the end of the tax year.
2. Eligible Income: Eligible income typically includes:
   • Pension income from a registered pension plan.
   • Annuity payments from an RRSP or RRIF if you are 65 or older.
   • Certain other annuity payments received by individuals 65 or older.

I went into this one in way more detail in my RRSP video, so check it out for more.

Digital news subscription tax credit

The Digital News Subscription Tax Credit is a non-refundable tax credit that helps Canadians save money on their taxes when they subscribe to qualified Canadian digital news services.

How Does the Digital News Subscription Tax Credit Work?

1. Eligibility: To be eligible for the Digital News Subscription Tax Credit, you must:
   • Subscribe to a qualifying Canadian digital news service.
   • Have paid for the subscription in the tax year.
2. Eligible Subscriptions: The subscription must be to a qualified Canadian journalism organization (QCJO) that primarily produces original news content.
3. Claiming the Credit: You can claim up to $500 in eligible digital news subscription costs each year. The tax credit rate is 15%.

Climate Action Incentive

The Climate Action Incentive (CAI) is a tax credit that provides financial relief to individuals and families in provinces where the federal carbon pollution pricing system applies. It’s designed to offset the cost of carbon pricing.

How Does the CAI Work?

1. Eligibility: To be eligible for the CAI, you must:
   • Be a resident of a province where the federal carbon pricing system applies (e.g., Alberta, Saskatchewan, Manitoba, Ontario).
   • File a tax return for the year.
2. Payment Amount: The amount you receive depends on your province of residence and family situation. The payment includes a base amount for the individual, plus additional amounts for a spouse or common-law partner and each child under 18.

Political Contribution Tax Credit

With elections coming up, you might want to pay attention to this one. The Political Contribution Tax Credit is a non-refundable tax credit that provides financial relief to individuals who make contributions to registered political parties, electoral district associations, or candidates.

How Does the Political Contribution Tax Credit Work?

1. Eligibility: To be eligible for the Political Contribution Tax Credit, you must:
   • Make a contribution to a registered federal political party, a registered federal electoral district association, or a candidate for a federal election.
   • Have a receipt for your contribution.
2. Credit Amount: The amount of the tax credit depends on the total contributions made in a year. The credit is calculated as follows:
   • 75% of the first $400 contributed.
   • 50% of the next $350 contributed.
   • 33.33% of contributions over $750, up to a maximum credit.

Disability tax credit

The Disability Tax Credit (DTC) is a non-refundable tax credit designed to help individuals with disabilities or their supporting family members reduce the amount of income tax they owe.

How Does the Disability Tax Credit Work?

1. Eligibility: To be eligible for the DTC, you must:
   • Have a severe and prolonged physical or mental impairment that markedly restricts your ability to perform basic activities of daily living.
   • Have a medical practitioner certify your condition on Form T2201, Disability Tax Credit Certificate.
2. Tax Credit Amount: For the 2023 tax year, the base amount for the DTC is $8,870. If the person with the disability is under 18, there is an additional supplement of $5,174.

A good accountant is worth their weight in gold, which is why I’ve partnered with a very experienced Certified Public Accountant (CPA). If you’re serious about saving on taxes and planning your financial future, check out the planning services we offer, and book a free consultation when ready!