15 shocking tax tips that you need to know about now
October 2023
Every year around tax time, you can hear the sound of scrambling across the country as Canadians try to get their financial ducks in a row. Unfortunately, even if you are on top of your taxes, you’re likely still missing out on some useful credits and deductions.
Indeed, there are many (many) deductions and credits that people don’t know anything about, but which if claimed could help reduce your overall taxes owing. Next time tax time comes around, make sure to take these tax tips into account – you may be shocked by how much extra cash you could save.
Investments
Build a bigger nest egg with a spousal RRSP.
Want to save more money and potentially pay lower taxes on those withdrawals in retirement? Of course you do. If you’re the higher income-earning spouse, consider setting up a spousal Registered Retirement Savings Plan (RRSP) account to which you make the contributions, and from which your spouse makes the withdrawals in retirement. You’ll get the same advantage as if you were putting income into your own RRSP (a tax refund on contributions), but when the money is later withdrawn, it will be taxed in your spouse’s hands at his or her lower rate. Contribution room is based on your room, but the tax savings can be huge if your spouse is in a considerably lower tax bracket.
Keep using a TFSA.
The Tax-Free Savings Account (TFSA) has sure come a long way since it was first introduced in 2009. These days, contribution room grows by $6,500 every year, so if you haven’t invested anything in the account and you were at least 18 years old when the TFSA was first introduced, you now have, as of 2023, $88,000 of room to use. That’s enough to kick-start your retirement savings or save for another long-term goal. Best of all, you’ll never have to pay a cent of tax on your gains or withdrawals.
Home ownership
Rent out the basement and deduct mortgage and property tax expenses.
If you have a basement apartment in your abode, or are in a position to create one, consider renting it out. Not only will the income help you pay down your mortgage faster, but you can also claim the rental income annually and deduct certain expenses on a pro-rated basis. This includes mortgage interest, utility bills and property taxes. One caveat: be sure to report your rental income on your tax return, because if the Canada Revenue Agency discovers you’ve “overlooked” reporting, the late penalties and interest charges could put you in the poorhouse.
Deduct home office expenses, even if you’re not an entrepreneur.
Ah yes, working from home – where wearing your pants during a Zoom meeting is optional. Work-from-homers, even if they’re not business owners, can deduct expenses related to the workspace in their home, as long as it’s their primary place of business. Eligible deductions include a portion of utilities, electricity, maintenance and minor repair costs and more. There are two ways to claim those expenses:
- A flat rate method, according to which you claim $2 a day for every day you worked from home in the year, up to a maximum of $500.
- If you have expenses higher than $500, you can use the detailed method, which calculates expenses based on how much space in your home is used for your office.
Don’t forget the Tax-Free First Home Savings Account (FHSA).
There’s nothing like home, sweet home. The FHSA can help you save for your first home tax-free right now. If you’re at least 18 years old and haven’t owned a home where you lived this year or at any time in the preceding four calendar years, you could be eligible to open this account, which was introduced in April 2023. You can make tax-deductible contributions of up to $8,000 annually, up to a lifetime contribution of $40,000. Better yet: set up regular monthly automatic payments and supercharge your savings.
Make use of the GST/HST New Housing Rebate for renos and new builds.
If you build or buy a new home to live in, or make substantial renovations to your current place, you may be entitled to a rebate on the GST or HST you’ll pay. To qualify, the house must be your principal residence, the construction must have been done in the past two years, and you must have either built a new home, gutted your entire home or built a major addition that doubles the size of your abode. The rebate varies by province, but in Ontario, the maximum rebate amount for owner-built houses is $24,000 if you paid the HST on the purchased land, and $16,080 if you didn’t.
Medical
How to claim the Medical Expense Tax Credit (METC).
Even with our publicly funded health care system, there will be medical expenses you’ll have to pay for out of pocket. Fortunately, you can claim some of those purchases on your tax return. Currently, there are more than 100 eligible expenses that qualify for the METC, including ambulance service, prescription drugs and crutches, and even gluten-free food products if you have celiac disease. You can claim this non-refundable tax credit for yourself, your spouse and your kids if they’re under 18. While either spouse can make the claim, it’s recommended to put all those expenses on the income tax return of the lower-income spouse in order to maximize tax savings.
Deduct private medical insurance premiums.
A lot of Canadians have workplace insurance programs, which typically come with some sort of annual premium. Did you know that premium can be deducted from your taxes? That’s right: you can claim the premium you pay for a private health insurance plan (one that comes from your workplace or other private plans) that covers your spouse, your common-law partner or your minor children, including medical, dental and hospitalization plans.
Keep track of costs of travel for medical treatments.
Accessing medical care in a centre outside of your community can be expensive, with gas, food and perhaps hotel costs all adding up. Good news: there are medical tax credits that cover many of those costs, although you do have to travel at least 80 kilometres from your home – that includes travelling to hospitals outside of Canada – to claim the credits. In terms of transportation, you can claim bus, train, plane and taxi fares, as well as vehicle mileage.
Miscellaneous
Save by claiming child care expenses.
Kids are expensive, especially when it comes to paying for daycare and camps. Fortunately, you can claim some expenses to offset those costs. You’re allowed to claim up to $8,000 per eligible child under the age of seven and $5,000 per eligible child if they’re between seven and 16. Expenses include nursery schools, daycare centres, individual child care providers, day camps and overnight camps. The deduction is usually claimed by the lower-income earning parent to allow for work, continuing their education or other similar pursuits.
Tax credit for interest paid on student loans.
When it comes to paying off student loan costs, every little bit helps. The loan principal isn’t tax deductible, but fortunately the interest on it may be. Whether the interest is deductible will depend on the kind of loan you’ve received: it must fall under the Canada Students Loan Act, the Canada Student Financial Assistance Act, the Apprentice Loan Act or similar provincial laws. If you can deduct, you’re allowed to claim any interest paid on the loan within the preceding five years. Consider putting any tax savings back on the loan to get the bill down faster.
Make a move on your moving expense.
Moving to a new job in a new city is stressful enough, but the hefty moving expenses can make the change that much more overwhelming. On the positive side, there is some relief: salaried workers, the self-employed and students can deduct any travel expenses incurred when moving at least 40 kilometres closer to a new work location or post-secondary school on a full-time basis. You can claim meals, vehicle expenses and hotel fees for up to 15 days, as well as the cost of cancelling your lease, or costs such as legal fees and real estate commissions related to selling your old home and buying a new one.
Submit adoption expenses.
There are all kinds of ways to start a family, and all types of deductions to help. If you’ve adopted a child, you can claim a refundable tax credit for your adoption expenses. The maximum claimable amount for each child can be split in any way with your spouse or common-law partner, provided the total is not more than the maximum claimable amount for the year. Claimable expenses include adoption fees paid to an agency, court costs, travel and living expenses related to the adoption, and document translation fees, among others.
Take advantage of the Canada Training Credit (CTC).
Created in 2019, this refundable credit helps Canadians cover the cost of eligible training fees from courses taken at universities, colleges and other qualified educational institutions. To take advantage of the credit, you must be between ages 26 and 65, your total working income must be more than $10,100, and your individual net income mustn’t exceed $150,473. The credit accumulates at a rate of $250 per year, up to a lifetime amount limit of $5,000 (20 years, or until you turn age 65). You only get this benefit if you file a tax return. As of 2022, every eligible Canadian will have accumulated $750.
Review your income tax bracket.
Everyone who pays tax has at least some understanding of income tax brackets: if you make more than a certain amount, you pay more tax. But what many people don’t know is that income tax brackets can change year to year, because they’re tied to inflation. That’s not a bad thing – in 2023, for instance, federal income tax brackets climbed by 6.3%. If you made the same as you did last year, you could end up paying less tax depending on your income level. Figuring out income tax rates can be complicated: it’s calculated by tiers of income, so it’s not as simple as saying, “I made $300,000 and half goes to tax.” So talk to a professional to help you figure it out. It’s good to know your rate so you can get the most out of your tax deductions and financial planning.
There are plenty of other credits and deductions to take advantage of, but these are the most frequently overlooked. While none of them are the equivalent of winning the lottery, they can at least lighten your tax return load each year.
