Unfortunately, we’re all required to pay taxes. They’re such a pain, and no one we know truly enjoys doing them each year. We all just sort of groan, suck it up and get it done.
But while it may not be the most fun part of your day (or year, for that matter), that doesn’t mean you can’t use filing taxes as an opportunity to make some extra money!
There are probably even a few ways to get reimbursed that you didn’t know about. Here’s how to maximise your tax return in Canada.
How to maximise your tax return in Canada
In order to learn how to maximise your tax return in Canada, you first need to calculate your total taxable income. You can then lower that by adding any tax deductions and credits you qualify for.
Deductions work to reduce your total taxable income, while credits reduce the amount of taxes you should owe.
When is the tax return deadline in Canada?
Another thing you need to know when you’re learning how to maximise your tax return in Canada is the deadline to file your taxes. The deadline for tax filings in Canada is May 1, 2023.
If you’re self-employed or you have a spouse or common-law partner who is, then the deadline is extended to June 15, 2023. All taxes owed to the CRA are required to be paid by May 1, 2023.
What is an income tax refund?
An income tax refund is when the federal government has collected too much taxes from you throughout the year and they then give the over-taxed funds back to you.
This typically happens if your employer has taken too much out for taxes, or if you qualify for deductions or credits to lower your tax payments.
Tax rates in Canada
One of the things you’ll need to know when learning how to maximise your tax return in Canada is the tax rates in Canada. Here’s a list of the federal tax rates for 2022 to give you an idea of what to expect:
| Taxable Income | Federal Tax Rate |
|---|---|
| $0- $50,197 | 15% |
| $50,197- $100,392 | 20.5% |
| $100,393- $115,625 | 26% |
| $115,625- $221,708 | 29% |
| $221,709 + | 33% |
Here’s why learning about tax deductions is important:
A taxable income of more than $221,709 is taxed at 33%, which means that if you get a $1,000 tax reduction you could save as much as $330 on your federal taxes.
If you have a taxable income of less than $50,197, you’ll be taxed at a rate of 15%, so if you get a tax reduction of $1,000 it could save you as much as $150 on your federal taxes.
So as you can see, it’s incredibly helpful to know a bit about tax rates before you claim deductions.
How to maximise your tax return in Canada using deductions and credits
There are loads of credits and deductions that can be used to maximise your return. Here’s a look at some tax deductions and credits you should consider when learning how to maximise your tax return in Canada:
Childcare expenses
If you’re wondering how to maximise your tax return in Canada and you have a child under 16 years of age, then it’s possible for you to claim a deduction.
You can claim childcare expenses for things like summer camps, daycare centres, overnight boarding schools, nannies and other caregivers. Typically, childcare expenses have to be deducted by the spouse that has the lowest income.
The Canada Child Benefit provides up to $569 per month for each child in your household that’s under 6 years of age and up to $480 per month for each child between the ages of 6-17.
Of course, these payments are dependent on the number of children you have, their ages, and your family’s net income. This is another way for you to earn some extra money if you’re looking to learn how to maximise your tax return in Canada.
Child support or spousal support payments
Another deduction that many people overlook is child support or spousal support payments.
If you’re here to learn how to maximise your tax return in Canada, you may be interested to learn that there are noticable impacts on tax returns for both child and spousal support payments. However, the deductions depend on the type and amount of your payments.
Interest on student loans
Another deduction you should consider claiming if you’re learning how to maximise your tax return in Canada is applicable if you or your child is currently enrolled in a post-secondary institution.
You can claim the interest on student loans. You can’t use this deduction on personal loans or lines of credit.
And you should only apply the deduction if you owe taxes, otherwise it’s best to let it roll over to subsequent years because you’re able to apply the deduction for student loan interest for up to 5 years.
Max out your RRSP contributions
Many younger individuals here to learn how to maximise your tax return in Canada have likely not considered this option.
You’re allowed to contribute up to 18% of your earned income from last year to the Registered Retirement Savings Plan, as well as any unused amounts you have leftover from previous years.
Log into your CRA MyAccount to learn about your contribution limit, and then you should do whatever you can to reach that limit. You’re even allowed to use the interest from your Tax-Free Savings Account (TFSA) to contribute to RRSP.
You can use these calculators for RRSP and TFSA to further learn how to maximise your tax return in Canada.
Property taxes for owners and rental payments for tenants
If you’re either a property owner of a rental property that pays property taxes or a tenant that makes rental payments, then you should likely pay attention to this tip on how to maximise your tax return in Canada.
Landlords can claim property taxes for the time period they rented their property with Form T776. And if you use your home for any sort of employment purposes, whether you’re employed or self-employed, you can claim part of your rental payments.
Union or association dues
If you’re in a professional organization that collects dues, then this tip for how to maximise your tax return in Canada is something that should be of interest to you.
A lot of union or association dues are tax-deductible, which means that they’ll ultimately lower your taxable income.
Employment expenses
This is a great tip if you’re learning how to maximise your tax return in Canada if you’ve recently began working from home, if your employer has asked you to buy office supplies, or if you’re self-employed and work from home.
You can deduct things like office supplies or cell phone bills. Also, teachers and educators are allowed to claim as much as $1,000 in certain teaching supplies on their taxes.
Tuition expenses
If you’re a post-secondary student here to learn how to maximise your tax return in Canada, then this deduction is for you! You can claim your tuition fees on your taxes.
Check the tax forms from your school to find out how much you were charged in tuition expenses so you can claim them on your taxes.
Moving expenses
If you’ve moved in the past year, then you can claim the moving expenses on your taxes- as long as you moved at least 40 km closer to work, your new business, or school.
Some of these expenses can include storage costs, temporary living expenses, travel expenses, expenses incurred from canceling a lease and more.
Medical or charitable expenses
If you’re someone here to learn how to maximise your tax return in Canada and you’ve got medical expenses or have made donations to charity, then it’s possible you can claim these expenses on your taxes.
Certain medical expenses, like medical cannabis purchased by patients can be claimed. For maximum benefits, spouses should pool these contributions onto one of the spouse’s tax returns.
So, keep receipts for doctors visits, hospital stays, dental appointments or procedures, diabetic supplies, prescriptions, and any gluten-free products you’ve purchased due to Celiac disease.
Home buyer’s credit
If you’ve purchased a home in the past year and you want to learn how to maximise your tax return in Canada, then the good news is that you can claim a $5,000 tax credit.
However, this only applies if you haven’t lived in a home that you or your spouse owned during the past four years.
GST/HST new housing rebate
If you’ve either made considerable renovations to your home or you’ve built a new home, then you can qualify for the GST/HST New Housing Rebate. There’s something similar for landlords, as well, if they meet certain conditions.
Territorial and provincial credits
Many territories and provinces provide tax credits for certain demographics. There are safety-related tax returns for seniors who have performed home renovations, climate action incentives, and more.
Visit the website for your province for information about more tax credits you may qualify for.
Capital gains from RRSP and TFSA accounts
This isn’t a refund or a credit, but it is a good way to save money. And we’re betting that if you’re here learning how to maximise your tax return in Canada, saving money is something you’re also interested in.
The interest on your TFSA and RRSP accounts is tax free, so you should leverage your TFSA and RRSP accounts as much as you can to increase the amount of interest they generate.
Capital losses write-offs
If you’re an investor learning how to maximise your tax return in Canada, then this section should be interesting to you. Say you’ve invested in an asset, and then something goes wrong and you lose money on it. It’s possible for you to claim that loss on your tax returns.
You should apply it against your capital gains. If your gains don’t quite cover the amount of the loss, you can then claim whatever is leftover as a net capital loss.
You can use net capital losses to lower the amount of taxable capital gains you have, and you can do this for gains of the past 3 years or up to three years in the future. However, it’s important to remember that you can’t claim losses in tax-free accounts like your RRSP or TFSA accounts.
Business expenses for the self-employed
If you’re self-employed you may have been reading through the list of deductions and credits in our How to Maximise Your Tax Return in Canada article and wondering if there’s anything there that applies to you.
Well, good news: this one does! If you’re a self-employed small business owner, you can claim business expenses, like office supplies, bank fees, advertising costs, travel expenses and more.
If you happen to work from home, then you’re able to claim things such as a portion of your utilities, repairs, or insurance costs. The amount you’re able to deduct depends on how much of your home you use for business purposes.
Disability tax credit
If you’re disabled and looking for information on how to maximise your tax return in Canada, then the good news is that there is a tax credit for those who receive disability benefits.
The Disability Tax Credit (DTC) aims to reduce the amount of taxes that people on disability are forced to pay.
Eiligibility requirements include visiting a physician and having them write a statement that says you have a severe physical or mental disability.
The requirements and amount of the tax credit vary by province, but if you qualify for this tax credit then it’s likely that you qualify for other credits and assistance.
Home office expenses
If you worked from home during the pandemic and you want to know how to maximise your tax return in Canada, then it’s good to know that the CRA has created a flat rate to allow people to claim those office expenses.
You’re allowed to claim $2 for every day you worked from home, up to $400 or 200 days. You’re not required to calculate the size of your workspace or keep documentation about your work from home expenses, nor do you have to file a T2200 form.
The only qualifications for this credit are:
- Working from home in 2021, either for reasons involving Covid-19, or because your employer required it
- Working from home over half of the time for four weeks in a row during 2021
- And expenses that you claim are for work purposes during this time period.
Canada workers benefit
Low-income workers looking to learn how to maximise your tax return in Canada can claim the CWB or Canada Workers Benefit on their taxes.
The Canada Workers Benefit provides a maximum refund of $1,395 for individuals or $2,403 for families. There’s also a supplement if you’ve already been approved for the Disability Tax Credit and have the certificate filed with CRA.
If you qualify for this benefit then you’re allowed to ask for a refund advance, which allows you to receive half of it early in four separate installments.
Canada training credit
When learning how to maximise your tax return in Canada, it’s helpful to know that you can receive a tax credit if you’re a less-privileged individual seeking training to advance your career.
This credit provides $250 every year to cover tuition expenses and course fees, with a maximum lifetime payment amount of $5,000.
Vehicle expenses
One thing you may not have considered if you’re learning how to maximise your tax return in Canada is claiming your vehicle expenses. You can do this if you use your vehicle for work. You can also claim some vehicular expenses if you’re self-employed.
Some of the expenses you can claim include gas, licensing and registration fees, insurance, leasing costs, maintenance and repairs, and more. You can even claim the interest on the money you borrowed to purchase your car!
You can also take advantage of deductions like the Capital Cost Allowance if you’ve bought your car. This is a deduction that takes place over years and depends on the depreciation value of your car.
The maximum amount you can get for a passenger vehicle is $30,000, and for zero-emissions passenger vehicles you can get $55,000.
If you use your car for both personal and business reasons, then you can write off the portion of trips and expenses you’ve racked up for business purposes.
You’ll need to keep a detailed record of each trip you make for business, what the trip was for, the mileage, and dates of the trips. Keep the documents and receipts prepared and organized so that you can come correct in the event that you’re audited.
You can claim certain vehicle expenses if you’re a salaried employee, too. However, you can’t claim the commute to and from work.
Claim donations
One thing to keep in mind when learning how to maximise your tax return in Canada is that you can claim donations. You should get receipts for all of your donations.
After the first $200, you may get as much as 40-50% back on charitable donations, which definitely makes it worth claiming!
Claim the interest on investment loans
Here’s a great tip for any investor learning how to maximise your tax return in Canada: claim the interest on any loans or money you’ve borrowed to make investment purchases.
This can actually be quite a money-making scheme if you pull it off properly! If you’ve borrowed a large sum of money and use it for investments, then you can claim the interest on the money you’ve borrowed for the investments. This could lead to massive refunds!
Don’t forget about carryforward balances
Anyone learning how to maximise your tax return in Canada should pay attention to this section. If you don’t take advantage of deductions or credits one year, many of them will rollover to the next year.
As a matter of fact, you can take advantage of some of them years later! For instance, you may have been aware of tuition credits, deductions for RRSP contributions or work-from-home expenses. And returns on charitable donations can be carried forward for up to 5 years.
File your taxes on time
The simplest way to maximize your tax return is to file your taxes on time. This is because you won’t have to deal with late fees and penalties, which could cut into your return.
So, either file before or on the deadline. But if you want to maximize the amount you get, avoid filing after the filing deadline.
Claim public transportation expenses
Keep all of your transit passes because you can claim them for up to a 15% tax credit to recouperate some of your spending if you take public transportation every day.
Claim your cell phone
If your boss calls you on your cell phone a lot, then you may be able to claim your cell phone to deduct a considerable amount. Keep good records to ensure you can keep track of how often you’re using your phone for business.
What information should you have ready to file your taxes?
A good bit of information to have when you’re learning how to maximise your tax return in Canada is what information and documents you should gather up in preparation to file your taxes.
You should definitely collect all of your receipts if you plan to take advantage of credits or deductions because you’ll need documentation and proof to qualify for them.
For income verification purposes you’ll need a T4 or T5 form. Of course, these are only to verify your income, determine its amount and where it comes from. The deductions and credits you claim won’t come with forms or slips.
Keep receipts for things like medical and work expenses, charitable donations and anything else you want to claim as a deduction.
You should also keep record of any credits or deductions that you didn’t take advantage of the year before because many of them will carry forward into the next year, which means that it may not be too late to take advantage of them.
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