Tax credits help you keep more of your hard-earned money. Individuals and families often struggle to stay ahead of their bills and debt. In 2017, the average income for a single person in Canada was $33,000 and $92,700 for families. The last thing you want to do is pay the government more than you should.
Thankfully there are tax credits.
Depending on your eligibility, applicable tax credits can reduce the amount of taxes you’ll pay to the taxman. In this article, we’ll discuss tax credits people commonly miss, tax breaks for your home, and tax breaks for people with disabilities. The amount of the credit you get can potentially save you hundreds or thousands of dollars.
Commonly missed tax credits
Are you planning for tax season and looking to reduce your tax bill? Claiming income tax credits qualify can help. The problem is many Canadians miss claiming tax credits. Some of the most commonly missed tax credits include dependent child care, medical and moving expenses, donations, and interest on student loans.
Child and dependent care
Do you pay child care expenses so that you’re able to work or go back to school? If so, you may be able to claim a tax credit for these expenses on your income tax return. To be able to claim child care expenses, your claim must meet the Canada Revenue Agency’s (CRA) eligibility requirements. Mainly the child for which you’re claiming child care expenses has to be:
- Yours, your spouse, or common-law partner’s, and
- Is dependent on you, your spouse, or your partner
Your child’s age determines how much you can claim for this tax credit. For children under seven years old, you can claim up to $8,000. The CRA deducts this amount from your taxable income.
If your child is:
Between the ages of seven and 16, you can claim up to $5,000
Disabled, the lowest-earning parent can claim up to $11,000.
If you’re taking care of a dependent, such a grandparent, you can claim a separate tax credit. The eligible dependant credit helps those taking care of elderly parents. You can also claim your child for this tax credit in some cases, mainly when you’re a single parent.
Do you pay any medical costs out of pocket? What about vision care premiums? You may be able to deduct these expenses on your income tax return. If you have an elderly parent who you’re claiming as a dependent, in some cases, you can deduct their medical expenses, too.
Did you move to be closer to work? Whether you work for a company or run your own business, if you moved at least 40 kilometres for work purposes, you might be able to claim some of your moving expenses. Examples of expenses you can typically deduct include:
- Travel costs
- Utility hookup
- Broken leases
- Title transfer costs
As a post-secondary student, you may also be able to claim moving expenses if you moved at least 40 kilometres to be closer to your college or university.
When you donate to a registered charity, don’t forget to ask for a tax receipt. Hold onto the tax receipt, so you claim it when the time comes. If you donated to more than one charity, you can combine your donations to receive even more money back from the government.
Interest paid on your student loan
Did you pay interest on your student loan? If so, you’ll be happy to hear that the interest is tax-deductible. There are several requirements for you to claim your student loan interest as tax-deductible; mainly, it has to be a qualifying student loan. If you combined your student loan with any other loans, you won’t be able to deduct the interest.
Tax breaks for your home
Are you a homeowner? The government offers all sorts of tax breaks to property owners. Whether you’re looking to make your home more accessible or greener, here are some of the federal refundable and non-refundable tax credits you’ll want to claim.
Making your home more accessible
Did you renovate your home to make it more accessible? If you did, you may be able to claim the Home Accessibility Tax Credit. The Home Accessibility Tax Credit is a federal non-refundable tax credit for seniors and people with disabilities who renovate their homes to make them more accessible.
Depending on the province in which you live, you may also be able to claim a tax credit at the provincial level as well.
Making your home greener
Are you looking to help out the environment? Making your home more ecofriendly is a great way to reduce your carbon footprint. Not only will you save money on your utility bill, depending on the home improvements, but you may also be eligible for tax breaks.
To help encourage homeowners to make their homes greener, several provinces offer grants and financial incentives. You can get money back on everything from energy-efficient appliances to windows.
Running a business out of your home
Do you run an office in your home or do you rent out a suite to tenants? Making improvements to either of those means you may be eligible for a break on the taxes you owe. You may be able to claim tax deductions you can use to lower the amount of tax due in the tax year.
The principal residence tax break
Are you planning to do home improvements to spruce up your home and increase its resale value? If so, there’s an important tax exemption that you should be aware of when you eventually sell your property.
Although your home is a place to live, the government also sees it as an investment. As such, you may have to pay tax on your home if it’s gone up in value when you sell it.a
The good news is that the government lets you sell your home free of federal taxes when it’s your principal residence. However, you’re still required to report the sale of your primary residence on your tax return. It may seem like a pain in the neck, but this tax policy is in place so that those who own more than one property pay their fair share of taxes.
Tax breaks for people with disabilities
Does someone you know live with a disability? You’re probably aware of the financial hardship that comes along with having a disability. For people with disabilities, it’s often difficult to find full-time employment, depending on how severe the disability is.
What makes things even more challenging is that there are often extra costs for care and accommodations for people with disabilities. It shouldn’t come as a surprise that people with disabilities may find themselves in debt.
When you have a disability, it can be tough to keep up with the ever-increasing cost of living. You can help lessen the financial load by being familiar with and applying for tax credits you may be entitled to boost your tax refund.
The Disability Tax Credit
The disability tax credit (DTC) is a non-refundable tax credit for people with disabilities and those supporting people with disabilities. It intends to help lower the income tax payable by the disabled person or their family.
Before you qualify to claim the DTC, you’ll need to show medical proof. You’ll need to something in writing from a doctor that shows you have a prolonged and severe disability lasting for 12 months or longer.
Applying for the DTC can take a while, which can be intimating for some. However, it’s well worth going through the effort of applying. By qualifying and applying for the DTC, your family may be eligible for other benefits that can help with your household’s cash flow.
If your application for the DTC is approved, it usually goes back up to 10 years and will remain in place for several years. The DTC isn’t the only tax benefit you can take advantage of as a person with a disability. Below are some others that may benefit you.
Registered Disability Savings Plan
Once they approve your application for the DTC, you’ll also qualify to contribute to the Registered Disability Savings Plan (RDSP).
Similar to the Registered Retirement Savings Plan (RRSP), the RDSP is a tax-sheltered account, however, instead of it helping you save for retirement, it allows parents of people with disabilities to save for long term financial security. When you hold your investments inside your RDSP, they grow tax-free until you take out the money. The federal government may also give you a helping hand by offering you an RDSP grant.
Home Buyers Plan
You usually have to be a first-time homebuyer to participate in the home buyers plan. Not so if you’re a person with a disability. This non-refundable tax credit applies to any home you purchase, not just your first one.
Child disability benefit
Are you the parent of a disabled child? Then be sure to claim this tax-free benefit to help with the cost of raising your child. You can claim it if your child is under 18 years old and has a disability. Similar to the DTC, they can pay it retroactively.