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Canadian Tax Deductions and Tax Credits

With it being tax season, lets look at some of the tax deductions and tax credits that are available to to Canadians. Please note that I have only picked the ones that are likely to be missed.  For a backgrounder,  check out an earlier post on the difference between a non-refundable tax credit and a tax deduction.

Childcare Expenses

Money spent on a child in the form of daycare, summer camp and/or extra curricular activities such as hockey and baseball camps can be deducted from the income of one or both parents.  Generally, up to $7,000 can be claimed for daycare per child, but it must be claimed by the lower income spouse.  For more reading, here’s a detailed post on other childcare benefits. Full childcare deduction details can be obtained at this Line 214 page on the CRA website.

Medical Expenses

Medical expenses incurred that are not reimbursed by an employer’s group plan can be claimed as a non-refundable tax credit. In addition, some expenses incurred on behalf of dependents other than a spouse or common-law partner can also be claimed. These expenses could include, but not limited to, full-time or part-time attendant care for a disabled person, expenses incurred in renovating a home to accommodate such a person, medical devices to assist with sight or hearing, and/or travel to obtain medical services. The Line 330 page provides exhaustive information on the topic.  Don’t forget that you can count health insurance premiums as a Medical Expense.

Disability Expenses

People with a prolonged physical or mental disability can use this deduction. To become eligible to apply, a Canadian medical doctor will have to certify on Form T2201. However, depending on the disability, a professional such as a psychologist or optometrist may suffice. This tax credit was addressed in the little-known Canadian benefit programs series not so long ago.

Self-employment Expenses

There are many tax considerations for self employed people . For example, if a homeowner uses their residence to conduct business, a portion of the mortgage interest, property tax, utilities, and insurance payment can be claimed. Similarly, a renter can claim a portion of their rent. The portion is determined by the percentage of the home (owned or rented) that is allocated for business use. More information here on how to claim a home office.

Moving Expenses

CRA allows a taxpayer to claim moving expenses within Canada, if a person moves to be employed or conduct business at a new work location. Students are also eligible if they move to pursue a course full-time at a university, college, or another educational institution. The important criterion to note is that the new home must be at least 40 km closer to the new place of work or school (by the shortest usual public route).

Charitable Donations

Donations and gifts made during the year can be claimed on Line 349. Spouses are allowed to combine their donations to maximize the tax break. The carry forward option enables the taxpayer to claim these contributions in any year within the next five years, if s/he will be in a higher income bracket at that time.  Here is more information on the donation tax credit.

Carrying Charges

Carrying charges such as interest paid on investment loans, fees paid to manage investments or get advice about investments, and legal fees paid in relation to support payments are eligible. There are a few restrictions under this section; so, please refer to the link above.

Eligible Dependent Amount

A taxpayer can claim the amount spent on an eligible dependent if s/he met certain conditions at any time in the year.

If you can think of other deductions that should have been included, please point them out in the comments. Have you used any of the above deductions? Did you face any inquiries about one of them?

About the Author: Clark works in Saskatchewan and has been working to build his (DIY) investment portfolio, structured for an early retirement. He loves reading (and using the lessons learned) about personal finance, technology and minimalism.  You can read his other articles here.

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About the author: Clark works in Saskatchewan and has been working to build his (DIY) investment portfolio, structured for an early retirement. He loves reading (and using the lessons learned) about personal finance, technology and minimalism. You can read his other articles here.

{ 5 comments… add one }
  • Marianne April 9, 2012, 2:45 pm

    Good tips! This is the first year that we’re claiming self employment deductions since both my husband and I made extra money with our side businesses this year. I first worked it out with Turbo Tax and they made it pretty easy. A lady that works with our financial advisor is doing up our ‘final draft’ though since they offer their services for free for all clients. I’m grateful for the extra set of eyes and for the money savings since Turbo Tax charges quite a bit more for business returns.

  • Chiqui April 9, 2012, 6:01 pm

    I am allowed to work 100% at home in my new work so I moved to another province (>40km away from HQ office) a month after starting work with the new company. Can I still claim the moving expenses?

  • Charles April 10, 2012, 11:08 pm

    Marianne: Be careful, if you declare part of your house and the related expenses (insurance, heating, etc.) when you`ll sell your house, the capital gain on that same percentage of the house you declared will count as your business` profit and you will pay taxes.

  • The Reverend April 11, 2012, 12:53 am

    I’m pretty sure the Donation Tax Credit is independent of the tax bracket you are in, so I don’t think it would make sense to carry credits over to future years for the purpose of using them in a tax year where you have higher marginal tax rate.

  • Jordan April 29, 2012, 10:37 pm

    Can carrying charges be carried forward and used in a future tax year? I have “fees paid to manage investments” but because of my current employment situation (or lack thereof), the reduction they provide to my net income is of no benefit for the 2011 tax year.

    Thanks.

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