The Most Commonly Used Tax Deductions and Credits to Reduce Your Tax Liability
There are a variety of tax deductions and credits that are available to Canadian taxpayers to reduce their tax liability. While it is beyond the scope of this article to review every single tax deduction and credit, it would be helpful to highlight the most prevalent and useful:
- Family, child-care, and caregivers deductions and credits
- Education deductions and credits
- Disability deductions and credits
- Pension and savings plans deductions and credits
- Employment expenses and credits
Let’s drill down each of these categories to get a better idea of how these deductions and credits can help you reduce the amount of tax that you will owe.
1. Family, child-care, and caregivers deductions and credits include the following:
- Child-care expenses: These are expenses that involve amounts that you pay to another person to look after your child in order that you can continue working or attend school. Payments made for child-care can be made to individual caregivers, nursery day school, day care centres, day camps and day sports schools, and overnight camps. This is a deduction, not a credit, and so reduces tax payable at an individual’s marginal rate.
- Support Payments: Individuals can claim deductions for spousal support paid to a former spouse. However, they cannot claim child support payments.
- Spouse or common law partner amount: You can claim a tax credit if at any time in the year you “supported” a spouse or common law partner and their net income was less than $12,069.
2. Education deductions and credits include amounts you may be able to claim as a deduction or a credit related to education. This refers to a variety of credits, including for tuition, interest on student loans, moving expenses, and in prior years, expenses for textbooks.
3. Disability deductions and credits relate to deductions and credits that can be claimed for someone with an impairment in physical or mental functions. This can include yourself, your spouse or common law partner, and other eligible dependents. These credits can be very valuable for people with disabilities and significant incomes, but eligibility is reviewed frequently.
4. Pension and savings plans deductions and credits relate to the amounts thatyou can claim related to pension plans and savings income you report, contributions to the Canada Pension Plan, RRSPs and more. In particular, these can allow taxpayers to partially offset tax that would otherwise be payable on pension income. Pension plans include what you earned under your employer’s registered pension plans (RPP) and deferred profit sharing plans (DPSP, and some unregistered retirement plans.
5. Employment Expenses and Credits involve amounts that you can claim related to employment. This includes union and professional dues, moving expenses, GST/HST paid to earn income, and employment insurance premiums.
A lawyer at Kalfa Law Firm is available to help you assess which deductions and credits apply to your situation, your eligibility, the amount allowable, and any exceptions. Claiming all the allowable deductions and credits can help you save substantially on your tax liability.
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– James Alvarez, Tax Counsel
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