What can you claim on your income taxes?

While filing one’s taxes will always induce a bit of stress, knowing what you can potentially claim and the affect it will have on your tax bill is something every Canadian taxpayer should familiarize themselves with.

Below we will cover all of the intricacies of the tax claim process including an explanation of the difference between a tax credit and a tax deduction, the most common tax deductions and credits, and how to easily file your taxes while maximizing any potential credits and deductions that might help lower your tax bill.

With many more taxpayers having worked from home during COIVD, the federal government has now simplified the home tax credit for most situations. You can now claim up to $2 a day on your federal return if you worked from home in 2020-2023 (for a maximum of $400 in 2020, and $500 each in 2021, 2022, and 2023). Best of all, you don’t need to sort through any receipts or ask your employer for any paperwork. As long as you worked from home for at least four consecutive weeks throughout the year, you are entitled to this “temporary flat rate method.”

However, if you have higher expenses related to working from home, you can use the “detailed method,” which allows you to enter the exact amounts paid for each expense. This method is best for those with higher expenses, and does require your employer to submit a T2200S/T2200 form.

If you have a home office, you can also deduct partial expenses related to your home office as a tax deduction. However, you can only apply these expenses for the actual amount of space the office occupies in your home. For example, if you live in a 1000 square foot apartment with a 100 square foot space dedicated to your home office, you can’t claim your full rent as an expense; you would only be able to claim 10%. This also applies to expenses related to heating, internet, a phone line, etc. Being overzealous with home office deductions in Canada is a likely way to trigger a CRA audit, which taxpayers will want to avoid at all costs.

Home office expenses you can claim (if you meet the eligibility requirements) include electricity, heating, hot water, internet, maintenance and minor repair costs, a portion of your rent, and more.

Ineligible home office expenses include mortgage fees (on both the principal and interest), costs associated with hooking up the internet in your home, furniture, cosmetic home upgrades, and more. Essentially, any expenses related to your home that are not explicitly required for you to do your job from home will not be considered eligible towards a tax credit.

Moving can be a major financial burden, but you may be able to apply a moving expense deduction to help offset your tax bill. There are a few different criteria for the moving expense deduction, including students who moved to be closer to school, an employee who moved to a new residence at least 40 km closer to work, or a self-employed worker who moved to set up a business in a new location.

Potential moving expenses you can deduct (based on eligibility) include paying for movers, travel expenses, expenses related to the selling of your previous home, food costs associated with your move, and even temporary housing (including hotels) for up to 15 days. Not all expenses will be applicable to every situation, but there are a wide range of deductions potentially available to account for nearly any moving situation imaginable.

Many medical expenses can be claimed as tax deductions on your return. While some eligible expenses require proof of a prescription, many medical expenses do not. The CRA website has an exhaustive list of eligible medical expenses that you can refer to before you begin to prepare your tax return.

Eligible medical expenses include laboratory tests, purchasing new eyewear, the cost of a hospital bed, and more. Ineligible expenses include dental work, gym fees, and medical marijuana, among others.

After you’ve determined the medical expenses you are looking to claim, figuring out the claimable amount takes a bit of work. Once you’ve added up your medical fees for the year (which can include medical expenses for your spouse or common-law partner and/or children), you will be asked to perform a quick calculation. You will either enter 3% of your salary or $2,421 (whichever amount is smaller). From there, you deduct that amount from your total expenses; the difference is the amount you can claim on your taxes.

Since you can claim expenses for your spouse or common-law partner, it’s worth performing the calculation based on both salaries to see which person is eligible for the larger deduction.

In addition to the most common tax deduction and credits we’ve examined above, there are a number of other potential credits and deductions available that may greatly reduce your tax bill. They include:

1. Age amount
Taxpayers 65 and over can claim an age amount. The amount varies based on your income, and this amount can be transferred to your spouse or common-law partner, so some calculation would be beneficial to see how you can maximize this credit.

2. Donations
If you made a donation in the preceding year you can claim a tax credit for the full amount (up to 75% of your salary). Eligible outlets include registered charities, registered journalism organizations, registered arts organizations, and more.

3. Home buyers
First-time homebuyers can claim a tax credit in the amount of $5000 to help offset the costs of purchasing your first home.

4. Student loans
You can claim the interest paid on a loan for post-secondary education going back as far as 5 years on your tax return. (If a relative paid your loan for you, they can claim this amount.) Best of all, if you don’t owe any money for the current year, you can claim the interest you paid on any tax return in the next five years.

5. Child care
You can claim child care costs on your taxes including day care fees, nursery expenses, school fees, camp fees, and more. If you and your spouse or common-law partner are each claiming child care expenses, be sure to go over this section carefully, as some eligibility criteria may change based on your income.

6. Provincial tax credits
Additional tax credits may be available to you depending on the province or territory you reside in. The amounts will vary depending on your tax situation and income, but anything that helps bring down your total tax bill is a welcome addition.

Most Canadian taxpayers should be eligible for tax credits and deductions. The amounts will vary depending on the details of your tax situation, your income, and other factors. As a general rule, more tax credits are available to lower-income taxpayers, or those with numerous applicable deductions. However, it’s a good idea to familiarize yourself with the available tax credits and deductions regardless of your income, as you may find ways to bring down your tax bill that you had never previously considered.

Filing your taxes on your own has never been easier given the prevalence of easy-to-use and comprehensive tax filing software, which includes a basic free option or a paid upgrade for more involved returns. Some examples include:

Wealthsimple Tax

Originally known as Simpletax, Wealthsimplke Tax is a component of the popular Wealthsimple app. A notable benefit of using Wealthsimple Tax is the option to manage and track your investments, trades, and tax returns all through one application. You can file your taxes free of charge or give a donation for their service.

Filing your taxes is always a stressful process, but understanding the types of tax credits and deductions available to you doesn’t only help lower your next tax bill, but will also stimulate ideas for how you can potentially save money in the future.

The process may seem daunting, but the CRA website clearly lists all of the tax credits and deductions available to taxpayers. Familiarize yourself with them, and you may be able to save more than you think.