The Canadian tax system is complicated, to say the least. We have a progressive tax system, where the more you earn, the more you pay in income tax, but decades of centre-left and centre-right governments have resulted in a myriad of new taxes, and new tax credits. If you’re not a freelancer, incorporated or have a bunch of side hustles, your income tax probably gets deducted from your salary each month, so tax time usually means getting money back from the government.
However, when you need to try and figure out how many 'business brunches' with your shared-office-space colleagues to write off, or what square footage of your bedroom constitutes a 'home recording studio' things can get more complicated.
Here are a couple of key tax credits that you should never forget to claim:
Education-related tax credits
There are three main kinds of education-related tax credits post-secondary students and their families can claim — the tuition tax credit, education tax credit and textbook tax credit. Not all provinces offer all three kinds of tax credits. At the federal level, you have the tuition tax credit. Only Nunavut and Yukon offer a textbook credit — all other provinces offer an education tax credit.
First, the federal tuition tax credit. If you’re over 16 and enrolled in some sort of post-secondary program in a college or university, you’re eligible for a tax credit of 15 percent of the amount of tuition paid to an educational institution. That tax credit is non-refundable, meaning that you can’t get it back in cash every year while in school, but it will build up to eventually offset your tax bill when you start working. Now, if you happen to not have taxes to offset, you could transfer these tuition tax credits over to your parents, or grandparents who are deemed eligible.
In the 2017 budget, the federal government extended the eligibility of the tuition tax credit to fees paid for certain occupational skills courses offered at post-secondary educational institutions in Canada — courses that are not at a post-secondary school level. You can check that list out here.
Prior to 2017, education and textbook credits were extra credits above and beyond the tuition tax credit that allowed you to receive a sum of money for each month of the tax year that you were enrolled in school. For a full-time student, you received $465 per month and if you were part-time, you received $140/month. From January 1, 2017, these education and textbook credits were eliminated at the federal level. Ontario, Saskatchewan and British Columbia also went ahead and eliminated their education tax credits. That’s generally not great, but keep in mind that any credits you had prior to 2017 are still valid, and yours to keep.
It’s also worth noting that if you have taken out a student loan either from the federal or provincial government (like OSAP in Ontario), you’re eligible to get back the money you paid in interest on those loans. It’s called the student loan interest deduction, and you’re not eligible for it if you’ve taken out a private loan say from a bank, or a loan from a foreign government.
If you’re a renter and you live in Ontario or Manitoba, you will get some money back from the government for paying rent, provided that you’re paying rent for your principal resident. Keep in mind that in Ontario at least, this tax credit is based on your overall family income — you might not get anything back if you don’t fall into the “low income” or “middle income” category.
Now if you do (you probably will if your household income is below $50,000 per year), you’re eligible for the Ontario Energy and Property Tax Credit, a small sum of money you will get back each month. The maximum amount you can claim is $1,008 for the whole year — those 65 or older can claim $1,148 a year, and students are eligible for $25 every month for the length of time during the year that you live in a student residence.
In Manitoba, you can receive a credit of up to 20 percent of your rent payments (or $700, whichever is less) as part of your tax returns.
Now if you work from home, and having a home office is a requirement as part of your employment, a portion of your monthly rent can be included in your tax return regardless of which province or territory you live in. According to the Canada Revenue Agency, if 10 percent of your home is used for work or to run your business, then 10 percent of your rent can be used as either a business expense or employment expense that is tax deductible.
If you file your taxes electronically, you technically don’t need to submit your proof that you paid rent. But always keep your rent receipts in case you are audited by the CRA.
Public transit tax credit
Most provinces offer some sort of tax credit for using public transit, the idea being to get more Canadians to use public transportation services. Currently, a 15 percent tax credit is available to Canadians who buy annual, monthly, weekly passes or pay-per-use fare cards (like Presto in Ontario) that they use on an ongoing basis. Budget 2017 however, proposed to eliminate the public transit tax credit for any kind of public transit use after June 2017.
For your 2018 taxes, remember to submit proof of transit use between January and June 2017. If you’re in Ontario and you use a Presto card, there’s a transit usage report available on Presto’s website that you can download and submit together with your taxes — it’ll show you how much you spent on transit every month. For those using a monthly pass, here’s hoping you kept your passes as tax evidence.
The more you contribute to your RRSP, the more you’ll get back on your tax returns every year. There is a maximum amount that you can contribute to your RRSP though — in 2017, according to the CRA it was $26,010. If you don’t contribute the maximum amount every year, you can carry forward that unused contribution room. The reason why you get money back when you contribute to your RRSP is that money is tax deductible, meaning that you can deduct your contributions from your overall income, a move that will defer the tax that you would otherwise have to pay.
For example, someone on a salary of say $60,000 who contributed $2,000 in 2017 will be eligible to get $593 back on their tax returns, just based on the income tax rates in Ontario.
Here’s a very handy RRSP tax savings calculator which you can use to determine how much you can get back every year — knowing the amounts might actually be a big incentive to contribute to your RRSP.
You can claim medical expenses for yourself, your spouse, common-law partner, and children under 18. It includes payments to doctors, dentists, nurses or private medical practitioners like psychologists or physiotherapists, but caveat to claiming this money is that you’ve paid for treatment out of pocket. You’re definitely not allowed to receive health coverage for treatment and also claim the expense on your tax returns. If your medical expenses are covered by your private insurance provider at work, you’re also not allowed to claim this as a credit from the government in your taxes.
The amount you can claim must first be reduced by 3 percent of your net income, or $2,237, whichever is less. The tax credit you will receive is 15 percent of the amount that remains. The CRA has a very handy list of all medical expenses that you can claim on their website.
It’s also important to know what medical expenses you simply cannot claim: gym memberships, non-prescription birth control devices, cosmetic surgery, hair replacement therapy, and teeth whitening products.
Also interesting to note that you can claim any medical marijuana purchases from a Health Canada licensed producer as a medical expense. So yes, weed is tax deductible!