As tax rules keep changing year after year, there are changes that took effect in 2024 that can have a big impact on your tax situation, therefore, it is a good idea to plan ahead to offset and minimize the tax implications of those changes. For example, you may be impacted by the additional trust reporting requirements, the proposed increase in the capital gains inclusion rate, or the effect of capital gains and stock option benefits on alternative minimum tax (AMT).

Here are ten strategies to help you save on your 2024 personal income tax:

1.   Maximize RRSP Contributions

RRSP is a Registered Retirement Savings Plan; it is the single most important plan for individuals to reduce their taxable income and save for their retirement. An RRSP is a tax deferral and savings plan. Money invested into your RRSP will be deducted from your taxable income, thus reducing your overall taxes. Here are the key benefits of an RRSP:

• Tax Deduction: Contributions to an RRSP are tax-deductible, reducing your taxable income for the year.
• Tax-Deferred Growth: Investments within an RRSP grow tax-free until withdrawal, allowing for compound growth
• Lower Tax Rates on Withdrawal: Withdrawals are typically made during retirement when you may be in a lower tax bracket, resulting in lower taxes being paid
• Unused Contributions: Any unused contribution room can be carried forward to future years
• Creditor Protection: In certain provinces, RRSPs are protected from creditors
• Early Withdrawals for Specific Purposes: Programs like the Home Buyers' Plan and Lifelong Learning Plan allow for tax-free withdrawals under certain conditions

You can contribute up to 18% of your earned income from the previous year or the maximum contribution room set by the government. The maximum of contribution limit for 2024 is $31,560. Unused contribution room from previous years can be carried forward.

You can contribute to an RRSP until December 31 of the year you turn 71. After that, you must either withdraw the funds or convert to a Registered Retirement Income Fund (RRIF).

The deadline to contribute for 2024 is March 3, 2025.

2.   Utilize the Tax-free Savings Account (TFSA)

TFSA is a registered savings account available to Canadian residents. Utilizing a TFSA can be a great way to reduce your overall tax burden. Contributing to a TFSA will not reduce your taxes like an RRSP, but a TFSA still has its benefits:

• Tax-Free Growth: Any income earned within a TFSA, including interest, dividends, and capital gains, is not subject to taxes. This allows your investments to grow tax-free
• Flexible Contributions and Withdrawals: You can contribute to your TFSA up to your available contribution room, and you can withdraw funds at any time without paying taxes on the withdrawals
• Contribution Room: The contribution room accumulates each year if you don't use it. The annual limit for 2024 is $7,000.

unused contribution room is carried forward, and any withdrawals made in a year are added back to your contribution room in the following year

• Variety of Investments: You can hold a wide range of investments in a TFSA, including cash, stocks, bonds, mutual funds, ETFs, and GICs
• Eligibility: Any Canadian resident aged 18 or older with a valid Social Insurance Number (SIN) can open a TFSA 

The TFSA is a versatile tool for saving for various goals, whether short-term or long-term, without the burden of taxes on the growth of your investments.

3.   Claim Home Office Expenses

In Canada, you can claim home office expenses if you meet certain criteria and follow specific method. To claim home office expenses, you must:

• Work from home: You need to have worked from home more than 50% of the time for at least four consecutive weeks in the year.
• Have a designated workspace: Your home office must be used exclusively for work or meet clients regularly.
• Have a signed form from your employer: You need Form T2200, signed by your employer, certifying that you were required to work from home and pay for home office expenses

What can be claimed depends on whether you are a salaried employee or you are a commission employee:

Salaried Employees:

- Utilities (electricity, heat, water)

- Rent

- Maintenance and minor repairs

- Home internet access fees

Commission Employees (in addition to the above):

- Home insurance

- Property taxes

- Lease of a cell phone, computer, laptop, tablet, etc., used for work

There are limitations on what and how much you can claim:

- Non-deductible Expenses: Mortgage: Mortgage interest, principal mortgage payments, furniture, capital expenses(e.g., replacing windows), and wall decorations cannot be claimed

- Proportional Use: Only the portion of expenses related to your work can be claimed. For example, if your home office is 10% of your home, you can claim 10% of your eligible expenses

- Income Limitation: The amount you can claim is limited to your employment income. You cannot use home office expenses to create or increase a loss from employment

4.   Income Splitting

Income splitting can be a great strategy to reduce your tax burden in Canada. Here are some common methods:

• Pension Income  Splitting: If you or your spouse are receiving eligible pension income, you can split up to 50% of this income with your spouse. This can help lower the overall tax rate for you and your spouse
• Spousal RRSPs: Contributing to a spousal Registered Retirement Savings Plan (RRSP) allows the higher-earning spouse to get a tax deduction while the lower-earning spouse can withdraw the funds in retirement at a potentially lower tax rate
• Spousal Loans: The higher-earning spouse can lend money to the lower-earning spouse at the prescribed interest rate. The lower-earning spouse can then invest this money, and the investment income will be taxed at their lower rate
• Tax-Free  Savings Accounts (TFSAs): Both spouses can maximize their TFSA contributions. Investment income earned within a TFSA is not taxed, which can be beneficial for income splitting
• Canada Pension     Plan (CPP) Sharing: If both spouses are receiving CPP benefits, they can share their CPP retirement pensions. This can help balance the income between spouses and reduce the overall tax burden

Keep in mind that some types of income are not eligible such as Old Age Security (OAS)Benefits, Canada Pension Plan (CPP) Benefits, and Guarantied Income Supplement (GIS) Payments

5.   Deduct Child Care Expenses

Claiming childcare expenses in Canada can provide significant tax relief. Here’s a breakdown of how you can benefit, what can be claimed, and the limits of what can be claimed:

Benefits- By deducting childcare expenses, you can reduce your taxable income, which may lower the amount of tax you owe. This deduction is particularly beneficial if you incur these expenses to earn income, attend school, or conduct research under a grant

Limits - The maximum amount you can claim per child each year depends on the child's age and circumstances:

- $8,000 foreach child under 7 years of age at the end of the year.

- $5,000 foreach child aged 7 to 16 years.

- $11,000 foreach child eligible for the disability tax credit, regardless of age

Eligible Expenses - You can claim expenses such as

- Daycare centers and day nursery schools, Caregivers providing childcare services,

- Day camps and sports schools where the primary goal is to care for children,

- Boarding schools and overnight sports schools or camps (with some limitations)

Ineligible Expenses - Certain expenses cannot be claimed, including:

- Fees for education, such as private school tuition.

- Costs for extracurricular activities like dance or music lessons.

- Medical or hospital care fees

Keep in mind, only one parent can claim childcare expenses and it is usually the parent with the lower taxable income, regardless of who paid them. In case of shared custody of a child, then each parent can claim the childcare expenses the personally paid – with certain requirements!

6.   Charitable Donations

Charitable donations in Canada can significantly reduce your tax liability through federal and provincial tax credits.

Federal Tax Credits – On the first $200 donated, you can receive a tax credit of 15%. On amounts over $200 you can receive a tax credit of 29%. For high-income earners, the credit can reach 33% if you're in the highest tax bracket

Provincial Tax Credits - Each province offers additional tax credits, which vary. For example, in Ontario you can receive a tax credit of 5.05% on the first $200 donated and 11.16% on amounts over $200

Maximum Claim - You can claim up to 75%of your net income in charitable donations for the year. If your donations exceed this limit, you can carry forward the excess for up to five years

7.   Claim Medical Expenses

You can claim medical expenses on your tax return to reduce the amount of tax you owe. You can claim medical expenses for yourself, your spouse or common-law partner, your or your spouse’s or common-law partner’s children under 18 years of age at the end of the tax year, other dependents, such as adult children, parents, grand parents, and siblings, if they depend on you for support

The medical expense tax credit is a non-refundable tax credit. This means it can reduce the amount of tax you owe but won't result in a refund if the credit exceeds your tax liability. The amount you can claim is the total of your eligible medical expenses minus the lesser of 3% of your net income, or $2,635 (for the 2024 tax year)

You can claim medical expenses for any 12-month period ending in the tax year, provided they were not claimed in the previous year

Eligible expenses include a wide range of products and services, such as prescription medications, dental care, medical devices and equipment, travel expenses for medical treatment if the distance is at least 40 km

8.   Use the First-Time Home Savings Account

A First Home Savings Account (FHSA) is a registered plan in Canada designed to help first-time homebuyers save for a down payment on a home. FHSA benefits you in two ways:

1. Tax Deductible Contributions: Contributions to an FHSA are tax-deductible, similar to an RRSP. This means you can reduce your taxable income by the amount you contribute, potentially lowering your overall tax bill
2. Tax-Free Withdrawals: When you withdraw funds from your FHSA to buy your first home, the withdrawals are tax-free, similar to a TFSA

The annual contribution limit is $8,000 per year and you can contribute for lifetime total contribution limit of $40,000. You can contribute to your FHSA for up to 15 years or until the end of the year when you turn 71, whichever comes first

If you don't end up buying a home, you can transfer the funds from your FHSA to your RRSP or RRIF without paying taxes on the transfer

The First-Time Home Savings Plan is a great tool for first-time home buyers to save efficiently while enjoying tax savings benefits

9.   Deduct Moving Expenses

You can claim moving expenses if you meet certain criteria:

- Employment or Self-Employment: You moved to start a new job or business.

- Full-Time Student: You moved to study full-time at a post-secondary institution.

- Distance Requirement: Your new home must be at least 40 kilometers closer to your new work or school location

If you qualify, you can claim allowable moving expenses such as:

- Transportation and Storage

- Expenses for traveling to your new home, including vehicle expenses, meals, and accommodation

- Temporary Living Expenses for up to 15 days for meals and temporary lodging near your old and new home

- Lease Cancellation Costs at your old home, Incidental Costs such as changing your address on legal documents, replacing driving licenses, and utility hook-ups

- Costs to maintain your old home while trying to sell it, up to a maximum of $5,000

- Costs associated with selling your old home, like advertising, legal fees, real estate commission, and mortgage penalties

- Cost associated with buying a new home, such as legal or notary fees and taxes (other than GST/HST) for the transfer or registration of title

Keep in mind that you can claim moving expenses in the year you paid them. You can only deduct moving expenses from the income earned at your new work or school location. If moving expenses exceed your income, you can carry forward the unused part to future years.

10.      Take Advantage of Employer Benefits

Taking advantage of employer benefits can be a great way to reduce your taxes in Canada. Here are some strategies you might find helpful:

• Registered Retirement Savings Plan (RRSP) Contributions: Many employers offer to match your RRSP contributions. This not only boosts your retirement savings but also provides immediate tax deductions, reducing your taxable income
• Health Spending Accounts (HSAs): Contributions to HSAs are tax-free and can be used to cover various health-related expenses. This can reduce your out-of-pocket medical costs and lower your taxable income
• Tax-Free Savings Accounts (TFSAs): While contributions to TFSAs are not tax-deductible, the investment income earned within a TFSA is tax-free. Some employers offer contributions to TFSAs as part of their benefits package
• Educational and Professional Development Expenses: If your employer covers the cost of courses, certifications, or other professional development activities, these can often be non-taxable benefits. This not only helps you grow professionally but also reduces your taxable income
• Work-from-Home  Benefits: If your employer provides allowances or reimbursements for home office expenses, these can be claimed to reduce your taxable income. Eligible expenses might include utilities, internet fees, and office     supplies
• Employee Stock Purchase Plans (ESPPs): Some employers offer ESPPs, allowing you to purchase company stock at a discount. While the discount is considered a taxable benefit, any gains from the sale of the stock may be taxed at a lower capital gains rate
• Relocation     Expenses: If your employer reimburses you for moving expenses related to a job relocation, these reimbursements can be non-taxable. You can also claim any additional eligible moving expenses on your tax return
• Child Care Benefits: If your employer provides childcare benefits, these can help reduce your taxable income. Additionally, you can claim any out-of-pocket childcare expenses on your tax return

Disclaimer: The information provided in this post is for general knowledge purposes only and is not intended to be a comprehensive list of all possible ways to save taxes in Canada. Tax-saving strategies can vary significantly based on individual circumstances. Therefore, this information should not be taken as professional tax advice. Tax laws and regulations are subject to change, and it is important to consult with a qualified tax professional to understand what applies to your specific situation. For personalized consultation and advice tailored to your individual needs, please contact our office.

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