If you’re like most Canadians, taxes take a big bite out of your wallet every year. For many of us they’re our single largest expense. Fortunately, there are a few ways to beat the taxman and keep more of your hard-earned money.
Depending on your life stage, here are a few strategies to reduce the tax you owe and maximize your return.
If you're a student or new graduate
Claim your moving expenses. If you moved to be closer to your college/university, you can claim some of those costs such as plane tickets or vehicle costs, as well as incidental expenses like changing your driver's licence.
Claim your tuition. This will reduce the amount of tax you owe by a significant amount while you're in school and after you've graduated.
Claim the interest on your student loans. If you graduate with student loans, you're able to claim the amount of interest you pay each year when filing your income taxes.
If you’re a working professional
Claim your work-from-home expenses. If you’re one of many Canadians who worked from home in 2021 due to the COVID-19 pandemic, you can claim part of those expenses (utilities, internet, office supplies).
Claim your RRSP contributions. The total contributions you made for the year can help reduce what you owe and may even help you to get a return. Staying on top of your RRSP contributions and maximizing your annual amount can save you a lot.
Claim your professional or union dues. If your job requires you to belong to a union or pay dues to a professional board, you can claim these expenses.
If you're self-employed or have a side hustle
Claim every eligible business expense. If you work from home or use personal resources to operate your business (internet, mobile phone, vehicle, etc.), you can claim the costs on your tax return. If you're not sure what's eligible, the government has a list.
If you're common-law or married
Split your pension income. Transfer up to 50% of qualifying pension earnings to a lower income earning spouse or common-law partner. The money you transfer will be taxed at their lower income tax rate.
Claim your charitable donations. Money that you've donated to charities and non-profit organizations can provide a small amount of tax savings and you have five years from the time of the donation to claim it.
If you have kids
Claim your childcare expenses. If you pay for a spot in a daycare centre, or for a caregiver such as a nanny or dayhome operator, keep your receipts and deduct this cost from your income tax.
Claim the Canada Education Savings Grant. Make RESP contributions to save for your child's education and the government will contribute an additional 20% on the first $2,500 you save per year.
If you’re retired
Share your pension. If you and your partner don’t receive equal Canada Pension Payments, you can apply to share pensions. This will serve to balance out your two incomes by increasing one partner’s and decreasing the other’s.
Claim the Age Amount Credit. This credit can reduce any taxes you owe but can’t be applied towards earning you a refund since it’s non-refundable. However, if the value of your credit is more than you owe, you can transfer the remainder to your partner to reduce any owing balance they may have.
Claim medical expenses. Keep all your receipts for medical-related expenses because you can claim a wide variety of them at tax time.
There you have it, savvy strategies that will help you hang on to more of your money. And remember, no matter what life stage you’re in, it’s best to file your tax return on time to get your refund sooner (if you’re owed) or avoid paying additional interest (if you owe).
Note: common side-effects of beating the taxman include an increase in joy while completing your taxes and a smaller chance of procrastination.
Originally posted on February 21, 2019.