Earning employment income does not usually allow you to claim that many expenses to reduce your taxable income, however, there are still some ways available to you to increase your tax credits, increase your tax refund, and some expenses you can claim to reduce your taxes.

First, let us talk about ways to reduce your taxable income and get a bigger tax refund:

1. RRSP

A Registered Retirement Savings Plan (RRSP) is one of the most important ways for Canadians to save for retirement, it is also one of the best ways to reduce your taxable income and get a bigger chunk back from taxes paid on your employment income. RRSP contributions are tax deductible, and all income and gains earned on your RRSP investments are not taxable. Amounts withdrawn from an RRSP account are added to your income for that year and are taxed according to your tax bracket.

You can contribute up to the maximum amount allowed for the year, maximum amount allowed shows on your prior year Notice of Assessment.

You can contribute towards your RRSP any time through-out the year, and contributions made in the first 60 days of the calendar year can be counted as contributions for prior year.

Do not exceed your RRSP contribution limit, over contributions are subject to a 1% monthly penalty for each month that the over contributions remain in the RRSP.

2. Moving Expenses

Moving expenses can be claimed if you move at least 40km closer to your new job, to run a business, or to attend post-secondary educational institution full time.

Moving expenses can include:

· Transportation and storage costs

· Travel, including vehicle cost and reasonable costs for meals and temporary lodging for you and your household members

· Costs of cancelling a lease for the old residence

· Legal fees to purchase a new home

· Real estate commission, advertising, legal and other costs related to selling the old residence

· Change of address costs, such as replacement of driver’s license, non-commercial vehicle permits, and costs associated with hooking-up and disconnecting utilities

· Cost to maintain your vacant old home after you moved up to a maximum of $5,000, this would include: interest, property taxes, insurance premiums, cost of heating and utilities

Note: if your employer pays for your moving expenses, then that amount has to be deducted from total moving expenses, unless the moving amount paid by the employer is reported as benefit to you and added to your income

3. Attendant Care Expenses

Attendant care expenses can be claimed when the attendant is not the taxpayer’s spouse or common-law partner and must be 18 years or older. Costs can be claimed to care for yourself, your spouse or common-law partner, your or your spouse or common-law partner’s dependent children under 18.

4. Employment Expenses

Most employees cannot deduct employment expenses on their tax return, however, based on certain employment conditions, you may be able to claim certain expenses similar to those claimed by a self-employed person. A job condition may require you to incur out-of-pocket expenses or work from your home office for which your employer does not compensate you for them. Those conditions must be declared on form T2200 — Declaration of Condition of Employment and expensed declared on form T777 — the statement of Employment Expenses. Some of the eligible expenses include:

· Tools for tradespersons, mechanics, apprentices, and forestry workers

· Vehicle expenses if you are required to travel for your employment — a detailed log must be maintained for this claim

· Workspace-in-the-home expenses such as cost of internet, computers, or office supplies

· Meals and lodging expenses for transportation industry workers such as long-haul truckers

· Accounting and legal fees you paid in the year to collect or establish a right to collect salary or wages

· Office rent if your contract of employment required you to rent an office and pay the expenses

5. Child Care Expenses

Child care expenses can be claimed by the parent with lower net income. Child care expenses are amounts paid by you or another person to have someone look after an eligible child so that you or the other person could earn income from employment, carry on a business, attend school, or carry on research. An eligible child is one of the following:

· Your or your spouse’s or common-law partner’s child

· A child who was dependent on you or your spouse or common-law partner, and who’s net income does not exceed the personal tax deduction

Expenses that can be claimed include any of the following:

· Caregivers providing child care services including relatives that are not claimed as dependents

· Day nursery schools and daycare centres

· Day camps and day sports schools where the primary goal of the camp is to care for children

· Boarding schools, overnight sports schools, or camps where lodging is involved

6. Start a Business

Owning a business may allow you to write off a bunch of expenses, such as car expenses, home office, utilities, etc. However, this can be a good idea if you actually get involved in this business and you have the intention of eventually making a profit from operating such a business.

7. Investments

Some investments, such as stocks, carry a preferential tax break. Dividends from eligible corporations are taxed at a lower tax rate. Interest paid on borrowed money to invest in eligible stocks and other investments is tax deductible.

8. TFSA

Tax Free Savings Account (TFSA) is available to all Canadians over the age of 18, amounts invested in a TFSA account is not deducted from your income, rather, all earned income inside a TFSA account including interest, dividends, and capital gains are not taxed, and funds can be withdrawn from the account at any time without any income tax.

There is a maximum on the amount you can contribute each year, your contribution room for any tax year is available on your Notice of Assessment for prior tax year.

Second, let us look at non-refundable tax credits:

There are also programs that will provide you with non-refundable tax credit, which also will reduce your taxable income, those programs do change from year to year, here are some of the programs currently available:

1. Home Buyers’ Amount (HBTC)

You can claim $5,000 for the purchase of a qualifying home in the year — or a maximum tax credit of $750. To qualify, a taxpayer must meet both of these criteria:

· You or your spouse or common-law partner acquired a qualifying home

· You did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time home buyer)

Persons with disabilities are eligible for the HBTC, even if they are not first-time home buyers. To be eligible, the disabled person must purchase the home for the purpose of lining in a home that is more accessible or better suited for their needs.

A qualifying home must be registered in your or your spouse’s or common-law partner’s name in accordance with the applicable land registration system and must be located in Canada. It includes both new and existing homes.

A qualifying home should be:

· Single-family houses

· Semi-detached houses

· Townhouses

· Mobile homes

· Condominium units

· Apartments in duplexes, triplexes, fourplexes, or apartment building

A share in a housing cooperative also qualifies if it gives you the right of ownership of the underlying property.

2. Medical Expenses

Medical expenses claimed by the taxpayer, taxpayer’s spouse or common-law partner, or a child under 18 will provide you with a non-refundable tax credit.

Medical expenses can be claimed for any 12-month period ending in the current tax year. Only eligible medical expenses — even those incurred outside of Canada — that are over 3% of net income can be claimed. There is a cap on the amount claimed, for 2019 it is $2,352 and for 2020 it is $2,397.

Eligible medical expenses include:

Amounts paid to medical practitioners, dentists, nurses, amounts paid to licensed private and public hospitals, medical services, eyeglasses, certain medical devices, ambulance charges, premiums paid to private health plans and travel medical insurance.

3. Tuition

Tuition expenses includes amounts transferred from your child and spouse/common-law partner. The tuition tax credit is available Federally and in all provinces/territories for fees paid by a student to a post-secondary educational institution in Canada or by a deemed resident of Canada to a post-secondary institution outside Canada if the student is at least 16 years of age and is enrolled in the educational institution to obtain skills for, or improve their skills in an occupation. Tuition needs to total more than $100. Costs of books, room and board, or student association fees cannot be claimed.

Private school tuition fees for elementary and secondary students are generally not tax deductible.

Examination fees paid to an educational institution, professional association, provincial ministry or other similar institutions, to take an occupational, trade or professional examination that is required to obtain a professional designation or status recognized by federal or provincial statute, or to be licensed or certified as a trades-person, to allow you to practice the profession or trade in Canada, may be eligible for the tuition tax credit.

4. Interest Paid on Student Loans

Student loan interest can be claimed by the student, even if it was paid by a related person. The loan must have been obtained under:

· The Canada Student Loans Act, or

· The Canada Student Financial Assistance Act, or

· A similar provincial or territorial government law for post-secondary education

Unused interest amounts can be carried forward for 5 years. If the interest was paid on behalf of the student by an unrelated person, then the student cannot claim this credit.

5. Home Accessibility Tax Credit

This credit is available to seniors who are 65 years or older or to persons who are eligible to claim the disability tax credit at any time in the taxation year. This non-refundable tax credit is for qualifying expenses incurred for work performed or goods acquired in respect of a qualifying renovation of an eligible dwelling. An eligible dwelling is the principle residence of the person applying for the credit. Maximum qualifying expenses allowed to be claimed is $10,000 per year and capped at a maximum tax credit of $1,500.

Qualifying expenses has to be of an enduring nature and integral to the dwelling. Qualifying renovation also has to be of an enduring nature and integral to the dwelling that will allow the qualifying individual to gain access to, or to be mobile or functional within the dwelling; or reduce the risk of harm to the qualifying individual within the eligible dwelling or in gaining access to the dwelling. Examples of qualified renovation include:

· Grab bars and handrails

· Walk-in tubs or wheel-in showers

· Widening doorways for wheelchair accessibility

· Lowering cabinets

You cannot claim expenses such as household appliances, home-entertainment devices, routine maintenance, or housekeeping costs

6. Canada Caregiver Credit (CCC)

The Family Caregiver Amount, Infirm Dependent Amount, and Caregiver Amount were replaced with the new Canada Caregiver Credit.

You can claim the CCC if you support your spouse or common-law partner with a physical or mental impairment. You may also be able to claim the CCC for one or more of the following individuals if they depend on you for support because of a physical or mental impairment:

· Your or your spouse’s or common-law partner’s child or grandchild

· Your or your spouse’s or common-law partner’s parent, grandparent, brother, sister, uncle, aunt, niece, or nephew if they are resident in Canada at any time in the year

The amount claimed will vary depending on your relationship to the person you are claiming the CCC, your circumstances, the person’s net income, and whether other credits are being claimed for that person.

7. Disability Amount

Disability tax credit is a non-refundable tax credit used to reduce income tax payable on the individual’s tax return. In case the disabled person has no taxable income or unable to use the full amount of the credit, the individual can elect to transfer all or part of the credit to a spouse, common-law partner, or another supporting person.

An individual must obtain approval from CRA by filing completed form T2201 Disability Tax Credit Certificate. The amount of this federal tax credit is $8,416 for 2019, and for taxpayers under 18 years of age, there is a supplemental tax credit of $4,909

8. Charitable Donations

Donations made to registered charities and other qualified donees can be claimed as charitable donations. Up to 75% of taxpayer’s net income can be claimed as donations, this limit can be increased when you donate capital property. Tax credit on donations under $200 is 15% and $200 plus is 29%. Unused donation credit can be carried forward for up to 5 years.

9. Political Contributions

The Federal Political Contribution tax credit is available when you make contribution to a registered federal political party or to a candidate for election to the House of Commons. The maximum credit you get is $650 per year. The credit % varies as follows:

· Credit on first $400 is 75% = $300

· Credit on >$400 to $750 is 50% = $175

· Credit on >$750 to $1,275 is 33 1/3% = $175

10. Adoption Expenses

Taxpayers who have adopted a child during the tax year are eligible for an adoption tax credit which is determined by CRA on annual basis. The credit is 15% of eligible expenses claimed.

Eligible adoption expenses include fees paid to adoption agencies and foreign institutions, court and legal costs, and document translation fees. Taxpayers may also claim travel and living expenses related to adoption and mandatory expenses for an adopted child’s immigration. Expenses must be incurred during the adoption period to qualify.

Please note that the above information is intended as a general source of information and should not be considered as specific source of legal or financial advice. Rules and regulation are subject to change at any time, as we at MMS Accounting & Bookkeeping Services will always try to provide you with up to date information. Please call our office at 647.749.8798 or email us at info@mmsaccounting.ca for further information.

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