Personal Tax Deductions and Tax Credits
When calculating your taxes, it is important to understand your deductible expenses and eligible tax credits that you can claim. Deductible expenses are subtracted from your income before it can be subjected to taxation. Understanding these expenses will help you go a long way in reducing tax liabilities. Tax credits, on the other hand, are a great way of improving your household income and can help you accumulate a lot of cash each year. Here, we are going to look at some of the deductible expenses and tax credits that you need to be aware of.
Deductible Expenses
Employment expenses
If you use your own means of transport to and from work without asking your employer for reimbursement, then you are entitled to automotive expenses deduction. In case you employer fails to reimburse the full amount, you can further claim until you get a reasonable amount matching your expenses. However, your employer must provide you with a completed T2200 for you to claim the deductions.
Carrying charges and deductible interest
If you want to claim deductible interest on borrowed funds, you must use the money for investment purposes. In this case, your eligible deductible charges include bank rates and counsel fee among other related charges. However, you must support your claim by providing original receipts.
Childcare expenses
Deductible interest on childcare expenses is limited to certain limitations. For instance, it is only deducted from the lower-earning spouse. Expenses include daycare, boarding school, babysitting, and camping fees. For you to get these deductions, you must provide the social security number of the person you paid as well as the supporting documents.
Moving expenses
You are eligible for moving expenses deductions if you move at least 40 kilometres to get closer to your new job, receive job-related training or run a business on behalf of the company. These deductions, however, are limited to how much you make in a year. In this case, you entitled to the following moving expenses;
- Accommodation, meals, and living expenses near your residence
- Amount used to change your driving license
- Cost of updating your legal documents to match the new location
- Cost of selling your old residence or cancelling your lease
- Cost for marinating your old residence for as long as it remains vacant; this is limited to $5,000
- Expenses spent on purchase of your new home
- Expenses spent on moving from your old home to the new one
- Utility connection and disconnection expenses
Attendant care and nursing home expenses
You qualify to claim for the attendant care expenses for the disabled in any of the following cases;
- You are receiving full time or part-time attendance care at home
- You are getting full-time attendance care in a nursing home
- You are receiving the care while in a home for seniors, retirement home or any other similar institution
How much you claim per year depends on whether you claim you have claimed your disability tax credit or not. In case you have made claims, you can get a maximum of $10,000 and in case you have made claims, there are no limitations. If you choose to get a full-time attendance care from a nursing home, there is no limitation on the amount of care you can get. This choice, however, limits you from the claiming disability tax credit.
Tax Credits
Charitable donations
If you and your spouse make charitable donations through the year, you are supposed to add that up and claim the amount as income tax return for one spouse. You are given higher tax credit if your donations sum up to more than $200. However, if it total amount is your credit limit, you can carry it forward up to five years, however, make sure you keep all your donations receipts to provide support when making your claims.
Medical expenses
You are eligible for a non-refundable tax credit for all medical expenses spent on you, your spouse, children or any other children who depend on you. You should consider adding up your medical expenses with those of your spouse so that one spouse can get significant tax return income. You can claim the tax credit on any month that ends in the year. You can claim expenses used on dental bills, private medical insurance, eyeglasses, and travel cost for regional or provisional medical care.
Disability tax credit
You are entitled to this tax credit if you suffer from a severe and lengthy physical or mental disability. However, for you to receive this credit, you must provide the CRA with a signed application from your physician. This tax credit is available to person with the following disabilities;
- Blindness
- Impaired speech, feeding, dress, walking, elimination, and hearing
- Life-sustaining therapy
- Mental health that prevents you from performing your daily functions
Once you have applied and been approved for the disability tax credit, you can also join the Registered Disability Savings Plan. People supporting family members with disability can also access any of the credits for;
- 18 years and above infirm dependents
- Nursing home and attendant care expenses
- Canada caregiver amount
Teacher and early childhood educator school supply tax credit
If you are a teacher or early childhood educator, you are entitled to 15% tax credit on all school supplies bought within the year costing up to $1,000.
Student loan interest
All post-secondary education student loan accessed via the Canada Student Financial Assistance, Canada Student Loans Act, or any other territorial government law paid on interest is eligible for a tax credit. If you get the credit but don’t use it the year you pay the interest, you can carry it forward up to five years.
Home buyers amount
If neither you nor your spouse or common-law partner has lived in a home anywhere in the country for the past four years, then you are entitled to a tax credit upon buying your first home. In this case, you can claim a tax credit of up to $5,000.
Home accessibility tax credit
This credit is accessible to the seniors aged 65 years and above and those who qualify for the disability tax credit. With this tax credit, you can claim up to $10,000 which you are supposed to use for renovations. The renovations are supposed to make your home more accessible and comfortable and reduce accidents that may happen to you within your home.
Transit passes
You qualify for a tax credit on transit passes used on certain weeks by you, your spouse, and children. However, this tax credit was eliminated in June 2017.
