With spring around the corner, and tax slips starting to arrive in the mail, it’s time for Canadians to prepare for one activity no one likes: filing your taxes with the Canada Revenue Agency. Too often, Canadians leave tax cash on the table by not filing their taxes every year and seeking out all the tax deductions they might be eligible for – and filing by the April 30 deadline. So, here’s a list of some common and not-so-common tax deductions and strategies that might apply to you.
Here are the basics:
File your tax return on time, even if you have little to no income, just turned 18 or are a newcomer to Canada
“The number one thing that you have to do – that’s the obligation of everyone – is to file your taxes every year. And to file on time,” says Josée Cabral, a Montreal-based senior tax specialist and the national spokesperson for H&R Block, in Canada.
Filing every year, even if you have no earnings, will ensure you receive certain government credits, including the GST/HST credit, the Canada Child Benefit, and various provincial tax credits. In addition, your return will be used to determine your eligibility for the new Canada Dental Benefit. And if you don’t file on time, those payments may get cancelled or be paid later than you expected, Cabral says.
If you are a newcomer to Canada, who may not have been in the country for the full year and may not have much income, you should still file a tax return as you may be eligible for provincial and federal tax benefits like the GST/HST credit, says Nimalan Balachandran, founder and chief executive officer of CloudTax, an online tax filing company. “Even if it is casual jobs that you have done, you might be better off filing so that you get some money back,” he says.
Medical expenses
Did you know that you can claim any out-of-pocket medical expenses for you, your spouse and your kids? That includes the portion not paid by a workplace health plan, the deductible paid to your company health plan, and the fees on your T4 (box 85) that you paid into your workplace health insurance. You can also claim costs to go to the dentist, and the cost of other medical devices prescribed to you by a doctor, from CPAP machines to braces to walkers to fertility treatments and medically-prescribed cannabis. If you’re not sure if an expense might be covered, there is a long list on the CRA website.
While it might be a bit of paperwork to keep track of these expenses – and hold on to documents in case CRA asks for proof – it can be as simple as keeping an accordion file folder handy throughout the year, says Cabral.
In addition, you can claim expenses for any 12-month period ending in 2023 or those expenses that you did not claim in 2022.
Moving expenses – for a new job or to attend school full time
You can claim moving expenses if you moved at least 40 kilometres for work or to be a full-time student.
These include hotel stays, food while travelling, real estate fees if you sold your house, the cost of renting a van or paying a moving company, and mileage if you drove to the new location in your own car, says Cabral. The key is to keep track of all these expenses while you are moving so you can claim these on your tax return. And, of course, keep all the receipts.
Home office expenses if you are self-employed or work from home
Remember the easy flat rate of $500 you could claim for your home office expenses if you were an employee who worked from home due to the pandemic? Well, that’s been scrapped. There are new rules regarding home office expenses for employees.
“All that’s gone now,” says Ed Rempel, a fee-for-service financial planner and tax accountant. “So, for 2023 we’re back to the old rules.”
That means employees who do work from home more than 50 per cent of the time for at least four consecutive weeks of the year need to get their employer to fill out a T2200 Declaration of Conditions of Employment form.
“It’s a good deduction, you can deduct part of (the costs of) your home and car and sometimes other expenses like your cellphone. So, it’s a nice deduction but there’s a bunch of paperwork involved,” he says. Make sure you get your company to include its HST or GST number, he adds, as you can claim that as well.
If you are self-employed, however, there are business-use-of-home expenses you can claim. That includes part of maintenance costs, heating, home insurance, electricity, property taxes, and mortgage interest or rent. You need to calculate the percentage of space of the home allocated to the office and you can claim that percentage of those costs.
Child care expenses
“Daycare fees are extremely high so that’s something that’s very important to include in your tax return to be able to get a portion of that back,” says Cabral. This includes full-time, part-time and before and after school daycare programs as well as registered summer day and overnight camps, she explains. Most daycares and camps will provide you with a slip that you can use to file your taxes – just check with your home province to see what applies.
Charitable donations
You can claim eligible donations to charities and political parties. If you discover that you forgot to claim a donation made last year, you can still add that to this year’s tax return, says Balachandran. “People don’t understand that these (deductions) can be made a couple of years after the donation,” he explains, adding that you can combine up to five years’ worth of donations and claim them in one tax year.
However, if you’ve made a significant donation, there is a new formula for the alternative minimum tax, says Rempel. “You can make a donation, but you might not get a refund if it’s too large,” he explains, and that may deter some people from doing large donations at once.
Tuition credits, including student loan interest costs
If you are a student at a college or university or other educational institution and you’re over the age of 16, you may have tuition credits you can claim. If you can’t use the credits yourself because you have little income at this time, you can carry them forward until you do have tax to pay or transfer part to another person, such as your parent, who can use up to $5,000 of the current year’s federal tuition amount.
Students can also claim any interest paid on student loans this year or any preceding five years. If you have no tax to pay this year then you can carry the amount forward for up to five years. “So, if you have a student loan that you’re paying interest on, that’s something you could claim as well,” says Balachandran. “That’s often overlooked.”
Here are some of the uncommon tax deductions available to some Canadians:
First-Time Home Buyers’ Tax Credit (HBTC)
If you were a first-time home buyer and purchased a qualifying home in 2023 (or later), you may be able to claim up to $10,000 for the First-Time Home Buyers’ Tax Credit, which would provide a tax credit of up to $1,500 to eligible home buyers.
Cabral says you’re considered a first-time home buyer if you or your spouse haven’t owned a home in the last five years. “That’s definitely something you don’t want to forget to add on to your taxes,” she says. “It’s a great reward for buying a house and having so many expenses that you get to get a little bit back.”
Disability Tax Credit for yourself or a dependent
The Disability Tax Credit (DTC) is a non-refundable tax credit that can help a person with a disability, or it can be transferred to their family member who supports them, reducing the amount of income tax they may have to pay.
“The disability tax credit is hard to get, so because of that reason a lot of people don’t pursue it,” says Balachandran.
To apply, there’s a form you need to fill out, and a medical practitioner must fill out and sign, to certify that you have a severe and prolonged impairment. That can include Type 1 diabetes, difficulty walking, or a vision or mental impairment. As the CRA states on its website: “Eligibility for the DTC is based on the effects of an impairment, not a diagnosis or the presence of a medical condition.”
Multigenerational Home Renovation Tax Credit
Balachandran says that new this year is the Multigenerational Home Renovation Tax Credit (MHRTC). It applies to those who renovated an eligible dwelling to establish a secondary unit so a senior or disabled adult can live with that relative. The credit is for costs up to $50,000, which can result in a refundable tax credit of up to $7,500.
Self-employed business expenses, including for gig workers
If you are self-employed or a gig worker, such as an Uber or Lyft driver, or do bike deliveries with SkipTheDishes or DoorDash, there are expenses you can deduct from your income, says Balachandran.
For example, you can deduct expenses for fuel or other reasonable costs incurred for you to run your business. You can also claim, over time, a depreciation cost, or Capital Cost Allowance (CCA), for your vehicle, e-bike or cellphone that you use for work. Workers “think about the gas, but they don’t really think about the depreciated value of their vehicle, so that’s something they could claim,” says Balachandran, that could also include an e-bike if you bought one to do deliveries. Anything that costs more than $500 can be considered a depreciating asset, but you can’t claim that expense all in one year, he adds.
On the flip side, you need to report the income you make in your gig job, and you need to put aside money to pay the tax on that income – something many people forget to do, says Cabral.
“A lot of people have a bad surprise in the first year because they don’t realize that there’s absolutely no taxes that were taken off those amounts,” she says. Many people come into H&R Block in February, she explains, to see how much they owe in taxes. Then they see if they can reduce that amount by contributing to their registered retirement savings plan (RRSP), which reduces their net income, before the deadline. That at least gives them a bit of time to plan or put money aside, Cabral says.
Capital loss – even if you didn’t sell an asset or investment
If you sell an investment and make money you pay a capital gain, but if you sell an investment and it loses money, you can claim a capital loss. But if you have an investment that has gone to zero – for example, a company has gone bankrupt – you may not be able to sell your shares to record that capital loss, says Rempel. “What people don’t realize is, you don’t have to sell it, you can just claim it as a loss without actually selling it because at the end there wasn’t even a market. You can’t even sell it.” That may also apply to now-defunct cryptocurrencies, he added.
Employing your kids
If you have a business, you can hire your kids or family members to work for you and if that person who is earning the income is in a lower tax bracket, then overall taxes paid by the family will be lower, says Tim Cestnick, co-founder and CEO of Our Family Office, which advises high-net-worth families on tax and estate planning issues. As well, wages can be deducted as a business expense.
“I think it’s a great idea,” he says. “The only criteria are that the amount you pay them has to be reasonable for the services provided.” That basically means that they should only receive as much as you might pay anyone else to do that specific job, and they need to actually be doing that job, he adds. You should also ensure there is a written employment contract as you would do with any new hire.
Carrying costs for investments and investment fees
You can claim the fees you paid to have a professional manage your non-registered investments or interest you paid on money used to invest, says Rempel, which are known as carrying charges.
This list is just a handful of potential deductions available to Canadians filing their taxes this year. While it takes extra legwork – and often involves dreaded paperwork – to track down all the details, taking some time to understand all the eligible deductions means you can reduce your tax burden as much as possible. And getting a few extra tax refund dollars will be worth it.
