7 Personal Tax Considerations Before Filing in Canada

When filing taxes, saving money is always the goal, so personal tax considerations are essential to ensure you don’t overpay. 

While you should pay what you owe, you certainly don’t need to pay more than you have to. That’s no way to live your ideal lifestyle. 

Before you file, you may want to look into these personal tax considerations that can save you a lot on your taxes.

1. Look for Applicable Credits and Deductions

You likely apply for one or some credits and deductions, so be sure to look through and find what you qualify for. Missing a credit or deduction is like leaving money on the table. Let’s look at some tax filers often forget.

Home office deduction – You may be able to claim a home office deduction as an employee that could equal $2 per day or actual expenses you paid like costs related to the workspace, supplies, and specific phone expenses. The deduction is intended for those who worked from home in 2020, 2021, 2022 due to the pandemic, so even if this doesn’t sound like a deduction you’d claim in a normal year, you may qualify.

Moving expenses – You may qualify for the moving expense deduction if you are an employee or self-employed and moved to a new location inside or outside of Canada.

First-time buyer – Many first-time homebuyers will qualify for a $5000 non-refundable income tax credit if they live in the home as their new residence.

The Canada Caregiver Credit – If you support a dependent, common-law partner or spouse with a physical or mental disability, you may qualify for this credit, which in most cases will be $2,295. However, it could be higher if the person is an adult-dependent (not your spouse or partner).

Child care – You may be able to claim eligible childcare expenses deduction for children under 16 to reduce your taxable income.

Medical Expenses – Keep your medical receipts because you may be able to deduct medical practitioner payments, prescription drugs, certain medical devices, and the cost of insurance. To qualify the total expense must exceed 3% of your net income or be greater than $2,268.

2. Contribute to an RRSP

Investing in a Registered Retirement Savings Plan is an investment in a more secure financial future for you and your family. Up to the limit for the year, (18% of earned income up to $27,830 for 2021), you can deduct contributions from your taxable income to pay fewer taxes. Personal tax considerations like this can save you a lot of money.

You don’t have to pay taxes until the money is withdrawn, therefore lowering what you pay now, and getting tax-free growth to get the most out of retirement savings. 

Grow your money between now and retirement and feel confident you can retire comfortably.

3. Transfer Tax Credit to Your Spouse

In some cases, if your spouse (or common law) has less tax obligation than credit, they can transfer the credit to you. Some examples include

  • Age amount if your partner is 65 or older
  • Canada caregiver for a sick child
  • Pension income
  • Tuition, education, and textbook amount

4. Look into Your Capital Cost Allowance

Capital Cost Allowance (CCA) applies to depreciable property, furniture, and equipment used for business. 

These types of property provide value over an extended period of time so you can deduct these costs over several years. If you qualify, the depreciated amount you claim lowers your taxable income.

5. Write Off Losses

You can write off certain losses for the year, such as

  • Non-paying customer
  • A capital loss
  • Theft losses
  • Unpaid rent
  • Business investment losses.

However, you have to be careful with this and there are plenty of regulations to follow. 

6. Pay Your Family

This is among the personal tax considerations that can save you big if you run a business. As a family, you are likely to share expenses and responsibilities. You can also share income to lower the tax bracket of the higher earner if you do it the right way. This is also known as income splitting.

Salaries paid out are considered a deduction, so paying your family members can help you save. You can pay this out in the form of dividends or as a salary for work performed.

However, you need to make sure you are within reasonable limits – meaning $250,000 for an administrative role is unrealistic. You also must have documentation to show your spouse or child actually works for the business.

7. Keep Good Records and Pay on Time

These are the two easiest ways to save on your taxes. You’ll need receipts and proof when you go to take advantage of the other personal tax considerations. 

Paying on time keeps you away from unwanted fees.

Get the Most Out of Personal Tax Considerations

Paying taxes is an essential civil duty, but you shouldn’t have to pay more than you owe. 

It’s up to you to assess personal tax considerations and save yourself as much as possible without triggering any red flags. 

While the tax considerations above are a good start, there are certainly more things to consider. An experienced accountant, like Argento CPA, can guide you through this process and ensure you are checking all of the money-saving boxes. Contact us today to get started!