Tax time can be overwhelming but knowing the deductions available can really help. In Canada we have many deductions that can reduce your taxable income and therefore your tax bill. Consult with your tax accountant to understand which deductions you can use. Here are the top tax deductions for Canadians.
1. Employment Expenses
If you are an employee and have to incur expenses for your job, you may be able to deduct those expenses. Here are some common employment expenses:
- Vehicle Expenses: If you use your vehicle for work, you can deduct a portion of expenses such as fuel, maintenance and insurance based on the kilometers driven for business use.
- Home Office Expenses: If you work from home as an employee, a portion of your home expenses (utilities, rent and internet) may be deductible if you meet certain criteria set by the Canada Revenue Agency (CRA). Seek advice from a tax accountant Toronto to ensure you’re claiming all you can and following CRA rules.
To claim these deductions you need to have your employer complete a T2200 form confirming you were required to incur these expenses.
2. RRSP Contributions
Contributing to a Registered Retirement Savings Plan (RRSP) is one of the best ways to save for retirement while reducing your current taxable income. Contributions to your RRSP are tax deductible, meaning the amount you contribute can be subtracted from your income and potentially lower your tax bracket. Plus, the funds grow tax free until withdrawal, making it a powerful long term savings tool.
3. Child Care Expenses
Parents in Canada can claim deductions for child care expenses while they work, attend school or conduct research. Eligible expenses include daycare fees, after school programs, and summer camps. The amount you can claim depends on the age of your child and the type of care. Remember, the lower income spouse usually claims these expenses.
4. Medical Expenses
Medical expenses can add up fast but many of these costs are deductible. You can claim many medical expenses including prescription medications, dental care, vision care and even travel expenses to receive medical treatment. The CRA allows you to claim eligible medical expenses that exceed a certain percentage of your net income or a fixed dollar amount, whichever is less.
5. Moving Expenses
If you moved for work or to study full-time at a post secondary institution, you may be able to claim moving expenses. Eligible expenses include transportation costs, storage fees and temporary lodging. Your new home must be at least 40 kilometers closer to your new workplace or school than your old home.
6. Charitable Donations
Donating to registered charities not only helps good causes but also gives you tax benefits. You can claim a tax credit for donations made in the tax year, with the first $200 at a lower credit rate and amounts above that at a higher rate. Keep records of all donations to maximize your tax credit.
7. Tuition Fees
Students can claim tuition fees paid to qualified educational institutions. This can really reduce your taxable income especially if you are in a post secondary program. Unused tuition credits can be carried forward to future years or transferred to a parent or grandparent.
Summary
Using tax deductions can make a big impact on your tax bill. By knowing these deductions and keeping good records, Canadian taxpayers can get the most out of their tax returns and keep more of their money. As always, consult a tax accountant to make sure you’re claiming all you can and following CRA regulations.
