Tax deductions and credits play a crucial role in reducing the overall tax liability for Canadians. This guide highlights key tax deductions that are often overlooked but can lead to substantial savings for you in 2024.
Medical Expenses
Eligible medical expenses in Canada cover a wide range, from dental services to prescription eyeglasses.
Taxpayers can claim expenses for themselves, their spouse or common-law partner, and dependent children under 18. However, only expenses exceeding the lesser of 3% of your net income or a set threshold can be claimed.
It’s essential to keep detailed receipts and understand that cosmetic procedures are generally not eligible.
Childcare Expenses
Childcare expenses, such as daycare, nanny services, and day camps, are deductible for children under 16. The limit is $8,000 for children under 7, $5,000 for children aged 7 to 16, and $11,000 for children with disabilities.
Receipts submitted must include the provider’s name and Social Insurance Number or Business Number.
Education-Related Deductions
Students can claim tuition fees, education, and textbook amounts. To be eligible, you must be enrolled at a post-secondary education institution or in occupational skills courses.
Unused education credits can be carried forward indefinitely or transferred to a spouse, parent, or grandparent, subject to certain limits.
Home Office Expenses
With the rise of remote work, home office expenses have become a significant deduction. Employees and self-employed individuals can claim a portion of their rent, utilities, and maintenance costs.
The Canada Revenue Agency (CRA) recently introduced simplified methods for calculating these deductions.
Charitable Donations
Charitable donations can be used as a non-refundable tax credit. The limit is generally 75% of your net income, and donations can be carried forward for up to five years.
It’s essential to obtain official donation receipts from registered charities or other qualified donees.
RRSP Contributions
Contributions to a Registered Retirement Savings Plan are deductible and can significantly reduce your taxable income.
The annual limit is 18% of your earned income from the previous year, up to a maximum limit set by the CRA ($31,560 in 2024).
Contributions can be made until 60 days after the year-end and can also be used to contribute to a spousal RRSP. For 2024, the RRSP contribution and deduction deadline for the 2023 tax year is February 29, 2024.
Union and Professional Dues
Union dues and professional membership fees necessary to maintain a professional status recognized by law are deductible from your taxable income.
Receipts or statements provided by the union or professional body are required for claiming this deduction.
Interest and Investment Expenses
The interest you paid on loans taken for investment purposes, except for registered accounts like RRSPs or TFSAs, can be deducted. This includes interest on loans used to purchase stocks or bonds.
However, the investments must have the potential to earn investment income.
Capital Gains Exemption
The Lifetime Capital Gains Exemption applies to the sale of qualified small business corporation shares and qualified farm or fishing property.
As of 2024, the LCGE limit is $1,016,836 for small business shares and $1,016,836 for farm or fishing property. This exemption can significantly reduce the tax burden when selling such assets.
Other Deductions
Moving expenses are deductible if you moved at least 40 kilometres closer to a new work or school location.
Employment insurance benefits are taxable, but related premiums are not deductible.
Related:
