CRA Tax Benefits to Save THOUSANDS in Canada!

Reducing the amount you pay in taxes can significantly increase your savings. In Canada, many people are unaware of various tax credits and deductions beyond the common ones, like contributions to RRSPs or TFSAs.

Key Takeaways

  • Learn about lesser-known tax deductions for more savings.
  • Check if you qualify for deductions like moving or work-from-home expenses.
  • Filing taxes on time ensures you avoid penalties and get benefits.

Tax Credits and Deductions

You can save a lot on your taxes if you know about tax credits and deductions. Many people aren’t aware of all the ways to reduce their taxable income. Here are a few credits and deductions you might not know about:

Moving Expenses

When you move for a new job or school, you can deduct moving expenses from your income as long as you move at least 40 km closer to your new workplace or school. Eligible expenses include:

  • Transportation and storage costs
  • Travel expenses like gas and meals
  • Temporary living expenses for up to 15 days
  • Costs of selling your old home, like real estate commissions
  • Legal fees and taxes for buying a new home

For example, Emma moved 300 km for a job and spent $8,000 on moving expenses. If her income was $70,000, she could deduct the $8,000, reducing her taxable income to $62,000.

Work From Home Deduction

You might be eligible for a work-from-home deduction if you worked from home over 50% of the time for at least four continuous weeks. You’ll need to fill out and have your employer sign a form, then keep all receipts and records. You can claim a percentage of expenses for:

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

For example, if your workspace is 20% of your home and your total expenses are $5,000, you can claim $1,000 as a deduction.

Child Care Expenses

You can claim child care expenses if your child is under 16 or has a disability. Claim expenses for:

  • Daycare centers
  • Caregivers or babysitters
  • Boarding schools or overnight camps related to child care

For instance, if you spent $6,000 on daycare and $4,000 on after-school care for your children, you could deduct $10,000 on your taxes.

Filing Taxes on Time

A large number of Canadians don’t file their taxes on time, resulting in penalties and interest. Filing on time helps you avoid:

  • Late penalties, which are 5% of your balance owing plus 1% for each full month your return is late
  • Missing out on benefits and credits, like the Canada child benefit or GST/HST credit

For example, if John files his taxes three months late with an owing balance of $20,000, he will face a penalty of $1,600.

Medical Expenses

Expenses for yourself, your spouse, or dependents can be claimed if they exceed the lesser of $2,759 or 3% of your income. Eligible expenses include:

  • Prescription medications
  • Dental services
  • Vision care (glasses and contact lenses)
  • Professional services like physiotherapy and psychological services
  • Medical devices prescribed by a doctor

For instance, if your net income is $60,000 and you have $3,000 in medical expenses, you can claim up to $1,800.

First Home Savings Account (FHSA)

The FHSA is a new account to help Canadians save for their first home. Benefits include:

  • Flexibility: transfer savings to an RRSP or RRIF if you don’t buy a home
  • Contributions don’t affect RRSP room
  • No repayment required when buying a home

To qualify, you must be a Canadian resident and at least 18 years old.

Maximizing Moving Expense Deductions

Moving can be pricey, but did you know you could save a lot on taxes by deducting your moving expenses? If you move at least 40 kilometers closer to a new job or school within Canada, you can deduct some of these expenses from your income. Here’s what you need to know:

Eligible Moving Expenses

  • Transportation and Storage Costs: This includes hiring a moving company.
  • Travel Expenses: You can deduct costs like gas, meals, and accommodations during the move.
  • Temporary Living Expenses: Up to 15 days of temporary housing costs can be claimed.
  • Cost to Sell Your Home: This can be a big deduction. Real estate commissions, legal fees, and taxes related to selling your old home qualify.
  • Cost of Purchasing a New Home: Legal fees for the purchase of a new home and some taxes can also be deducted.

Example to Illustrate

Meet Emma. She moved 300 kilometers for a new job and spent $1,200 on a moving company, $300 on travel expenses, $500 on temporary living expenses, and $6,000 on real estate commissions for selling her old home. Let’s break down her total deductible expenses:

Expense TypeAmount
Moving Company$1,200
Travel Expenses$300
Temporary Living Expenses$500
Real Estate Commissions$6,000
Total$8,000

Emma’s income for the year was $70,000. After deducting her moving expenses, her new taxable income would be $62,000. This results in significant tax savings.

Keep your receipts and document everything. Working with a tax professional can help ensure you don’t miss out on these valuable deductions!

Claiming Work From Home Deductions

Eligibility for Home Office Deductions

To claim the work-from-home deduction in Canada, you need to meet a few requirements. You must have worked from home more than 50% of the time for at least four consecutive weeks. Your employer should not have reimbursed you for all of your home office expenses. T

o support your claim, you have to fill out form T2200S, get it signed by your employer, and keep all receipts and records of your expenses. Once you have all these, you can claim a portion of your expenses for things like utilities (electricity, heating, and water), internet, rent, office supplies, and minor repairs.

Calculating Your Workspace Percentage

First, measure the size of your workspace and your entire home to determine the percentage of your home used for work. For example, if your workspace is 200 sq ft and your home is 1000 sq ft, your workspace percentage is 20%. Multiply your total eligible expenses by your workspace percentage. For instance, if your total expenses are $5000 and your workspace is 20%, you can claim a deduction of $1000.

Child Care Expense Claims

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

  • Daycare centers and nurseries
  • Caregivers like nannies or babysitters
  • Boarding schools and overnight camps
  • Educational institutions for the portion related to child care

You cannot claim expenses such as:

  • Medical or hospital care
  • Regular schooling tuition
  • Recreational activities (e.g., sports or art classes)
  • Transportation costs

Claim Limits

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

  • Under 7 years old: Up to $8,000
  • Between 7 and 16 years old: Up to $5,000
  • If they have a disability: Up to $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 both expenses are within the allowable deduction limits, you can claim the full $6,000 and $4,000, making a total of $10,000 that you can deduct on your taxes.

Filing Taxes On Time to Avoid Penalties

Impact of Late Filing

Not filing your taxes on time can lead to hefty penalties. When you file late, you’ll be charged 5% of your balance owing plus an additional 1% for each full month your return is late, up to 12 months. For instance, if you owe $2,000 and file three months late, you could end up paying an additional $1,600.

Keeping Your Benefits

Filing your taxes on time ensures that you continue receiving important benefits. If you file late, your benefits like the Canada Child Benefit and GST/HST credit might be delayed. Timely filing helps you avoid interruptions in these crucial supports.

Important Deadlines for Different Filers

Filer TypeFiling DeadlineTax Due Date
Self-EmployedJune 15April 30
Regular EmployeesApril 30April 30

For self-employed individuals, you need to file by June 15, but any taxes owed are still due by April 30. For regular employees, both filing and payment are due by April 30. Missing these dates can lead to penalties and interest charges.

Medical Expense Deductions

Approved Medical Costs

To make a medical expense claim, the costs must be for you, your spouse, common-law partner, or any dependents. Here are some common medical costs you can usually claim:

  • Prescription medication
  • Dental services
  • Eye care, including glasses and contact lenses
  • Services from professionals like physiotherapists, chiropractors, and psychologists
  • Medical devices and equipment that your doctor prescribes

Typical Non-Eligible Costs

Some costs are often mistaken as claimable when they aren’t. These costs include:

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

How to Calculate Your Medical Expense Deduction

You can only claim medical expenses that go beyond the lesser of $2,759 or 3% of your net income for 2024. For instance, if your net income is $60,000 and medical expenses are $3,000:

  • 3% of $60,000 = $1,800
  • Lesser between $2,759 and $1,800 is $1,800

Thus, you can deduct medical expenses over $1,800.

Benefits of First Home Savings Accounts (FHSA)

The First Home Savings Account (FHSA) helps you save for your first home in Canada. Here are some key benefits:

  1. Flexibility: If you don’t end up buying a home, you can transfer your savings to a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) without losing any tax benefits.

  2. No Impact on RRSP Room: Your contributions to the FHSA don’t reduce your RRSP contribution room. This means you can save in both accounts without worrying about affecting your limits.

  3. No Repayment Required: Unlike the Home Buyers’ Plan (HBP) under the RRSP, there’s no need to repay the amounts you withdraw from your FHSA when you buy a home.

  4. Tax Deductible Contributions: Contributions to your FHSA are tax-deductible, just like with an RRSP. This can give you significant tax savings while you save for your first home.

To qualify for an FHSA, you need to be a Canadian resident, at least 18 years old, and a first-time homebuyer. Investing in an FHSA can be a smart way to save for your future home, while also enjoying tax benefits.

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AUTHOR

Christopher Liew, CFA

As the founder of Blueprint Financial, Christopher leads a team that creates personalized strategies tailored to your life and business goals—so you can secure your future and enjoy your dream lifestyle with confidence and ease.
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