As you can imagine, this is one of the top 3 questions that we are asked every tax season. As a result, we decided to answer the question as simply as possible. Here is a brief summary of a few tips to help you make tax savings.
Contribute to a Registered Retirement Savings Plan (RRSP)
Contributing to your RRSP is a good way to reduce your taxes. The amount that you invest in an RRSP is deducted from your taxable income. The more you deduct from your income, the more you save on taxes.
The benefits of contributing to an RRSP:
1. Building retirement funds;
2. The ability to withdraw up to $35,000 to purchase or build a qualifying home;
3. The ability to withdraw up to $20,000 to pay for full-time training or education for you or your spouse/common-law spouse.
Please note that:
- What you save today will be taxable when you withdraw it;
- The age limit for contributing to your RRSP is 71;
- You have a maximum contribution limit which is shown on the notice of assessment sent to you by the Canada Revenue Agency (CRA) following your income tax return for the previous year. to find out more about RRSPs.
You’re entitled to claim your medical expenses!
All medical expenses that you paid during the year and which were not reimbursed can be deducted. This includes an amount paid to an insurance provider for health insurance coverage.
Examples of medical expenses: expenses incurred for a dentist, optometrist, psychologist or other health care professional.
Who can claim these expenses?
An individual who paid medical expenses for themself, their spouse or any dependent.
Generally speaking, the spouse with the lower income should claim this credit. Keep your receipts and attach them to your income tax return. You can ask your pharmacist for a summary of the amounts paid during the tax year.
Please note that:
- Medical expenses that are not reimbursed by your insurer are deductible to the extent of 3% or $2,397, whichever is lower, so you should keep documentation and receipts for your medical expenses;
- Massage therapy and purely cosmetic treatments are not eligible, except in cases where the procedure is due to a congenital problem or reconstruction following an illness or accident.Click here to find out more about medical expenses.
The First-Time Home Buyers’ Tax Credit
You could benefit from a tax credit of up to $1,500 if you acquired your first home during 2023.
Conditions:
- In the acquisition year or any of the four previous years, you did not live in another home owned by you, your spouse or your common-law spouse;
- The residence must have been acquired with the intention of making it your principal residence no more than one year after its acquisition. Click here to find out more about the First-Time Home Buyers’ Tax Credit.
The tax credit for moving expenses
Conditions:
- You must have moved to a new job or school location;
- You must have moved at least 40 kilometres closer to a new work or post-secondary school location.
You can claim the usual moving expenses such as movers, truck rental, transportation costs, storage, lease termination fees, accommodation and broker fees. Click here to learn more about the tax credit for moving expenses.
The tax credit for children’s activities
This credit is available on a provincial level only. It allows you to claim a refundable tax credit for children’s activities. The tax credit offered represents 20% of the membership or joining fees. You could obtain a maximum tax credit of $100 per child.
The tax credit for childcare expenses
You can claim a tax credit for childcare expenses that you paid for an “eligible child” while you were carrying out one of the following activities:
- Holding a job;
- Carrying on a business;
- Receiving benefits under the Québec parental insurance plan (QPIP);
- Taking a full-time or part-time course or program (secondary school, college, university).
On a federal level, childcare expenses must be claimed by the lower income earner (including an income of zero). Click here to learn more about taking advantage of the tax credit for childcare expenses all year.
Make charitable donations
Donations entitle taxpayers to a federal tax credit of 15% on the first $200 and 29% on the remainder in addition to a provincial tax credit. These provincial rates vary.
Donations can be made to hospital centres, churches and any other organization recognized by the Canada Revenue Agency.
IMPORTANT: Make sure that you receive an official receipt which shows the organization’s name, the amount donated and the date. Making a donation can pay off because the more you donate, the more you can reduce your tax bill.
One final tip
Increase your source deductions by filling out the Request to Have Additional Income Tax Withheld at Source form. Contact your employer for more information.
In conclusion, there are many ways to reduce your tax bill. If you’d like to find out more, contact our experts who can help you maximize your tax credits.