It’s tax season in Canada! Although it isn’t exactly a joyful time of year for a lot of people, it can be a great time to actually save some cash – if you know where to look.
That’s why we broke down 10 tax credits and deductions that you need to know about this tax season. From school and work to charitable giving, you can get quite a few dollars back in your pocket and save on your tax bill.
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What’s the difference between a tax credit and a tax deduction?
First, let’s break down the differences between a tax credit and a tax deduction. The two are quite similar, so it can get a little confusing.
According to BNN Bloomberg, a tax deduction reduces the amount of your taxable income. So, if you made $50,000 in annual income and got a tax deduction of $1,000, you’ll only be taxed for $49,000 of your income.
A tax credit, on the other hand, shaves money off the taxes you owe. For example, if you owe $1,000 in taxes, a tax credit of $300 means that you’ll only owe $800.
One funny (OK, annoying) thing about tax credits: some are refundable, and some are non-refundable, according to NerdWallet. A refundable tax credit means that if your tax credit pays more than you owe, you get a refund. So, if you owe $1,000 in taxes, but you got $1,500 worth of refundable tax credits, the government will give you the remaining $500 in cash, AKA those amazing tax refunds that show up in your bank account every so often!
However, a non-refundable tax credit will only reduce your tax bill. So, even if the tax credits add up to more than you owe in taxes, you will not receive that extra money back. For example, $1,500 in non-refundable tax credits for a $1,000 tax bill mean that you will not get that extra $500 in your bank account, but you will also not have to pay any taxes.
10 tax credits and deductions to help you this tax season
Now that we’ve gone through the differences between a tax credit and a tax deduction, we can move on to all the amazing ways to save on your tax bill this year.
Tax credit and deductions for charitable giving
Being generous pays off! If you donated some money to help out your favourite cause, you can get a tax credit or deduction for the exact dollar amount. Just make sure to have the donation receipt available for your accountant to calculate.
Tax credit and deductions for self-employment
Girlbossing may be out, but getting that money that you made all by yourself is in. If you freelanced, side hustled or did anything else in the self-employment realm, you may be able to claim a tax deduction for business-related expenses (think: that bougie lunch you had with a prospective client).
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Tax credit and deductions for working from home
Working from home is here to stay – and the government is recognizing that. You can claim a tax deduction of up to $500 just for working from home expenses (which is up $100 from last year!). You may even be able to claim more with an employer-signed form. So, that ergonomic chair may have saved you money in the long-run.
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Tax credit and deductions for work-related expenses
Similar to the work from home tax deduction, you can get a tax credit (non-refundable) for any work-related expenses, thanks to the Canada Employment Amount. Did you buy a new uniform or computer for work this year? Claim ’em! Depending on your income, there is a max amount you can claim. Also, if you’re self-employed, this doesn’t apply to you (but talk to your accountant about your HST deductions).
Tax credit and deductions for climate action incentive
Due to certain provinces increasing gas bills, you can now receive a refundable tax credit to offset this extra cost. Anyone in Alberta, Manitoba, Ontario or Saskatchewan can receive the Climate Action Incentive. If you live in BC, there is a similar tax credit called the BC Climate Action Tax Credit.
Tax credit and deductions for medical expenses
Despite Canada’s universal healthcare, there are some expenses that aren’t covered by your provincial health provider. Those things, like dental health, eye health and even fertility treatments, may be able to get you a tax deduction. See if your medical expenses are covered.
Tax credit and deductions for tuition fees
Starving student no more: make sure to file your tuition payments on your taxes so you can receive the Tuition Tax Credit! Unless your employer or your parents’ employer is paying for your education, you can likely get a decent non-refundable tax credit for expanding your mind.
Tax credit and deductions for student loan interest
If you’re now done with school, you may have some pesky student loans piling up. Thankfully, you can claim the interest on government-issued student loans as a non-refundable tax credit. However, if you have no taxable income this year, but still have interest on your student loans, the government recommends you wait until you file with income to claim that interest (you have up to five years to do this).
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Tax credit and deductions for moving for work or school
Moving is the worst, and is also extremely expensive. Lucky for you, if you moved more than 40 km this year to start a new job, open up a new business or begin a new educational journey, you can get a tax deduction! You may need to provide proof of moving and not every situation applies, but check out more info on the Government of Canada website.
Tax credit and deductions for occupational training
If you took any sort of educational course related to upleveling your career or taking a professional exam, you may be able to claim that as a refundable tax credit. There are a few requirements for this, including your age (26- to 66-year-olds only!). So check to see if this is for you.
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Figuring out taxes can be complicated, but finding the right tax credits and deductions can save you in the long-term! Good luck this tax season.