While we all have to pay taxes, there are various deductions and tax credits available to help us maximize our tax refund. We’ve compiled a list of 7 useful tips to help you get a bigger refund, boost your disposable income, and start saving more money for the things that matter most.
Filing your income tax return is a chore that most of us don’t want to think about, but it doesn’t have to be that way. It can be an excellent opportunity to save or get reimbursed for cash you didn’t know you were entitled to.
The deadline to file your tax return is April 30th. For self-employed individuals, that deadline is extended to June 15th. If you’re reading this blog post before those dates, you still have time to research what benefits apply to you. If it’s too late, you can still file your return and benefit from these deductions, but if you owe money, you’ll incur additional penalty charges.
The Canadian government are constantly updating the tax system. It can hard to keep up! Most people wait until the last minute to learn what credits and deductions impact them. Word to the wise: don’t wait until tax time to educate yourself. Knowing what you’re entitled early on in the tax year will make it easier to remember what receipts and documentation you’ll need to claim expenses later.
We’ve compiled a list of deductions, credits, and other helpful tips to help minimize taxes owed and maximize your refund.
The Child Care Benefit (CCB) was designed to help Canadian families with their child care expenses. Depending on your annual income, the amount a parent can claim per child aged six and under is $541.33 per month. For children aged six to 17 years old, parents are eligible to claim $456.75 per month. Visit this great CRA resource for more information about family and child care deductions.
The Canada caregiver credit (CCC) may be available to you if you're supporting a spouse, common-law partner, or a dependent with a physical or mental impairment. The amount you can claim depends on your relationship to the person you are caring for, your circumstances, the dependant’s net income, and whether other credits are being claimed for the dependant.
If you moved for a new job or full-time academic course recently, you might be eligible to deduct your moving expenses from your tax claim! Your move has to be at least 40 kilometres closer to your new job or school to qualify for this deduction. If you meet this requirement, you’ll need the receipts from your move!
Eligible moving expenses include transportation and storage costs, travel expenses, temporary living expenses, and costs related to selling your old home and buying a new one.
The Disability Tax Credit (DTC) is designed to relieve unavoidable expenses for Canadians with disabilities. To be approved for the credit, a medical practitioner must fill out and certify your condition. The government recently added nurse practitioners to the list of professionals who can verify eligibility for this tax break.
In 2018, the maximum federal disability amount was $8,235, with a maximum supplement of $4,804 for persons under the age of 18. If someone in your family is eligible for the DTC, they might also qualify for other programs like the registered disability savings plan, working income tax benefit, and child disability benefit.
You may already be aware of the Tax-Free Savings Account program, but there has been a recent update. The annual contribution amount for 2019 has been increased to $6,000, up from $5,500 in 2018.
Canadians who contribute to an RRSP can claim a tax deduction on the annual amount of money that is put into an RRSP account. Maximizing your RRSP contribution can help lower your tax bill, as this contribution reduces your taxable income. This nugget of wisdom is especially beneficial if you’re in a higher tax bracket. The larger your income is, the larger your marginal tax rate will be.
If you have had some medical expenses this year, you might be able to claim more than you think on your Canadian income tax return. The Canada Revenue Agency provides a list of medical expenses that may be tax deductible. This list conveniently highlights what medical expenses require a prescription from your doctor.
Some refundable tax credit expenses that you may not know about include air and water filters/purifiers, laser eye surgery, orthopedic shoes and inserts, and vitamin B12 supplements.
You’d be amazed at how many people incur additional charges because they submit their tax returns late. The late penalty is 5% of your balance owing, plus 1% of your balance owing for each month your return is late (to a maximum of 12 months).
You don’t have to pay the full balance of what you owe on or before April 30. You can avoid the late-filing penalty by simply filing your tax return on time.
Visit this CRA resource for more information on late-filing penalties.
The Canada Revenue Agency lets you claim interest paid on student loans in your tax returns.
However, there are a few restrictions.
You can only claim interest payments on loans received under the Canada Student Financial Assistance Act, the Canada Student Loans Act, and equivalent provincial or territorial programs.
You cannot claim interest on personal loans, lines of credit, or student loans from foreign banks. A home equity line of credit is also disqualified.
Your student loan interest claim is a non-refundable tax credit. It can only be used to lower your tax bill and cannot be used to receive a tax refund. Since you can carry forward student loan interest for up to five years, it might be wise to save your claim for a year when you owe a lot of tax.
Understanding how tax works may seem daunting and tedious, but as you can see, there are a lot of helpful resources that can help you understand it. Fresh Start Finance also has a list of 16 tax deductions you can use to maximize your next tax return.
The Canada Revenue Agency also has an online course to help you learn about Canada’s tax system and how to file a simple tax return. It’s a quick course that can teach you everything you need to know about filing your taxes in Canada.
H&R Block, SimpleTax, and TurboTax offer free filing software that makes filing your tax return a breeze. You can import the documents you need, and most of the forms auto-populate to save you a lot of time.
Maximizing your tax refund is a great way to boost your disposable income and start saving more money for important things like home renovations or buying a new car.
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