Did you know that 70 per cent of individuals get a refund? The remaining 30 per cent either owe money or nothing at all. Whatever boat you’re in, here are seven ways you can save on taxes.
Simplified home office deduction
Great news is this pandemic deduction has been extended. If you worked more than 50 per cent from home, you can claim $500 toward working-from-home expenses without filing a detailed T2200. For most people, this is the way to go. But let’s say you’re a sole proprietor, side hustler or have other streams of income. If this is the case, the detailed method of claiming your work-from-home expenses (measuring the size of your office, keeping supporting documents, etc.) is probably a better approach, and your accountant can help you with this.
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RRSP contributions
Phew, you still have a bit of time. You can contribute to your RRSP by March 1, 2022, and have it count toward your 2021 taxable income. For most people earning more than $55,000 annually, this is a great way to save on income taxes while getting even more prepared for retirement. Reminder! You’re allowed to contribute up to 18 per cent of your income annually (to a maximum of $27,830), and if you don’t use the room, it’s carried forward.
I like to recommend that you compliment your RRSP contributions with contributions to your TFSA, too. This money grows tax free whereas with the RRSP you save money on taxes today and pay them later on in retirement. You can find your RRSP contribution limit in your CRA My Account or on your last notice of assessment.
I also recommend that if there is a fairly significant income differential between you and your spouse, you take a look at a spousal RRSP contribution. This is where working with a qualified financial adviser can help you determine if this makes sense for you.
Savings for families
Parents, it’s not just in your head. Your costs to raise your family are going up, making this advice more valuable than ever. Firstly, when you file your taxes you’ll be assessed whether you qualify for the GST/HST credit (targeted to support lower-income families) and how much of the Canada Child Benefit (CCB) you’re entitled to (adjusted to your income).
And, there’s more …
You can find savings through RESP contributions, claiming child-care expenses, child disability credits, medical expenses for new parents and whatever provincial and territorial credits you might be entitled to. This is where working closely with a tax professional can help ensure you don’t miss getting what’s yours.
Here’s my pro tip — if you’ve got the flexibility in your budget, why not put the CCB directly into your child’s RESP and you’ll receive the Canada Education Savings Grant — more money for future education expenses! Whoop!
Medical expenses
You may have maxed out your benefit plans through work and have had to pay out-of-pocket for contact lenses, dental work, psychotherapy and more. The CRA allows you to claim qualified medical expenses.
In my experience I’ve found the CRA is particularly interested in reviewing these kinds of expenses so my advice here is to keep absolutely every supporting document in case you need to back up your claim.
Moving costs
If you moved more than 40 kilometres to work or run your business, or you moved to study as a full-time student (very common for people who were forced to retool their skills amidst the current economy), you can claim a number of moving-related expenses like transportation and storage fees, realtor commissions and more.
Donation receipts, interest on student loans and tuition expenses
If you gave money to a registered charity and got a receipt for it, don’t forget to include this in your tax filing. Did you pay interest on your student loans or take classes and receive a T2202? Include all of these easy-to-forget items with your filing.
File on time
If you do owe money, filing late will result in a penalty, plus you’ll pay interest on the amount you owe. Simply getting your return in on time can help you to avoid these costs, and give you helpful insight as to what you owe so that you can make a plan to pay it off.
My last tip is that if your financial situation isn’t super straightforward, work with a tax pro rather than trying to DIY it. This should hopefully help you get the maximum savings when you’re ready to file
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