When tax season comes around, many Canadians suddenly find themselves rushing to file their tax returns. It’s easy to panic, meaning you could miss out on a wide range of tax deductions and credits.
Many people overlook these tax deductions, which is a shame because they can be very beneficial. Don’t be one of them.
In this guide, we cover 13 of Canada’s most commonly missed income tax deductions and credits, along with the difference between tax deductions and credits and what to do if you miss a tax deduction.
- You might be able to take advantage of several tax deductions and tax credits in Canada.
- However, many people are unaware of this and end up missing out.
- This guide looks at 13 of the most commonly missed tax credits and deductions, including charitable donations, moving expenses, medical expenses, and student loan interest.
- Tax deductions reduce the amount of your income subject to income tax, while tax credits reduce the amount you pay on your taxable income.
- If you miss tax deductions, you may be able to make a tax return adjustment.
Commonly Missed Tax Deductions in Canada
What can you claim on your taxes? Here are 13 of the tax deductions and credits that Canadians often miss:
1. Moving Expenses
You can often claim deductions for the expenses involved in moving in a few specific situations.
For example, if you are moving to start a new job or business, or you are moving to study full-time, you may be able to claim deductions. These include expenses like transportation costs, travel expenses, costs related to legal documents, costs relating to maintaining your old property, the costs of selling your old home like legal fees, and more.
2. Medical Expenses
If you have eligible medical expenses that your health care plan does not cover, you may be able to claim a tax credit.
There are several limitations, and you can’t claim expenses that will be reimbursed by insurance.
Medical expenses can often add up, and you may not realize you can get a tax credit for some of them. There is a long list of things you can claim, so check this resource to find out more.
3. Disability Tax Credit
The disability tax credit (DTC) covers a wide range of conditions. If you have a condition classified as a disability, you may be able to use this to reduce your tax bill. There is more information about eligibility in this resource.
4. Child Care Expenses
Parents can take advantage of many tax credits and deductions, including adoption expenses for adoptive parents, fitness programs, and tuition expenses. You can also get a tax deduction for child care.
With the child care deduction, you can deduct up to $8,000 per year for children under six and $5,000 for children between seven and 15 for eligible child care, including preschool and nannies.
5. Student Loan Interest
You can claim a tax credit for the interest you pay on student loans, both federal and provincial. This is a 15% tax credit, but this does not apply to interest paid to a private lender like a bank or if you have consolidated your loans.
6. Canada Employment Amount
There are several employment expenses you can claim tax credits for. For example, with the Canada employment amount, you can claim work-related expenses like your uniform and work supplies up to a maximum of $1,287.
7. Union and Professional Dues
Do you belong to a union or other professional organization? You may be able to deduct various union dues or membership fees when you file your taxes.
These include professional board dues, professional membership dues, advisory committee dues and others.
8. Canada Workers Benefit
The Canada Workers Benefit used to be called the Working Income Tax Benefit, or the WITB. It is a refundable tax credit for low-income individuals and families with a working income of over $3,000.
The amount is based on your income and your family’s net income. The maximum amount is $1,428 for individuals and $2,461 for families.
9. Home Buyers’ Amount
When you buy your first home, you can claim up to $10,000 as a tax credit, which recently rose from $5,000.
It must also be a qualifying home, which includes a single-family house, semi-detached house, mobile home and more.
It is only available to first-time home buyers, and it is not available if you lived in another home you or your partner owned in the year of the acquisition or in the four previous years.
10. Amount for an Eligible Dependant
You can get a tax credit for an eligible dependent for a person who lived in your home, but not if they were just visiting if you were single, separated, widowed or divorced.
Dependants could be a parent, grandparent, child, grandchild or sibling. There are many situations where you can and cannot claim, and you can get up to $2,350 for a dependent under 18 and up to $7,525 if they are older than 18 and have a physical or mental impairment.
11. Charitable Donations
Even small donations can add up over the year, and you can get a 15% tax credit on the first $200 and 29% on the rest, up to 75% of your income.
You can also hold onto the donation amounts for up to five years and claim them together.
12. Political Contributions
If you make donations to a federal political party during the year, you can take advantage of the Federal Political Contribution Tax Credit.
There are various limits, which may be affected if you receive advantages for making the contribution, like gifts.
The maximum credit is $650 if you donated at least $1,275.
13. Carrying Charges
Finally, carrying charges are easy to miss. If you make investments, you may be able to benefit from this.
These include fees for investment advice and fees to manage your investments or take care of them.
Related: Best Free Tax Return Software.
Tax Deductions vs Tax Credits
While tax deductions and tax credits are often mentioned together, an important difference exists.
Tax credits reduce the amount you pay on your taxable income. For example, a tax credit of $1,000 will reduce your tax bill by $1,000.
Tax deductions, on the other hand, reduce the amount of income subject to income tax. For example, a $1,000 deduction will reduce your taxable income by $1,000, so you will save what you would normally pay in tax on that amount (e.g. a percentage of $1,000 rather than the whole $1,000).
While they may sound similar, they are different things, but the difference is quite subtle. The important thing to remember is that both will help you to save money.
How to Claim Missed Tax Deductions
While many tax deductions and credits are available, it’s easy to forget some. So what happens if you forget one?
Fortunately, you can make a tax return adjustment.
In general, you can make an adjustment for returns made in the past ten (10) years. However, there may be different restrictions for different types of credits and deductions.
You may want to get help from an accountant if you are unsure how to do this. It will involve gathering documentation, making the adjustment online or via mail, and then waiting for a decision.
This should take about two weeks for an online request, and the CRA will either approve the change or not.
There are many common tax deductions and credits in Canada, and these can seriously impact the amount you have to pay when you file your taxes.
The 13 above are just the start, and many more may be relevant for you.
One of the issues with these is that they often come with restrictions. There are certain things you can claim for and others you cannot, and it’s not always clear.
Read the official advice carefully for any deductions or credits that may apply to you, or get help from a professional when filing your tax return. Then ensure you are taking advantage of all the credits and deductions available.
Many tax deductions are commonly missed, including those in this guide. These include charitable donations, political contributions, childcare expenses and medical expenses.
If you forget to claim something on your taxes in Canada, you might be able to make an adjustment, but you cannot submit a new tax return. The quickest way to do this is online, and you might want help from an accountant.
Employers must make certain deductions for employees, including income tax, the Canada Pension Plan contribution and the Employment Insurance premium.
If you don’t file your taxes for three years, you could face legal problems related to tax evasion. This could result in large fines and even imprisonment.