Personal Finance 101

7 Tips to Get the Most out of Tax Season

Are you leaving money on the table when it comes time to file your income taxes? Many people do. They allow years of receipts to pile up in the drawer and don’t take full advantage of the deductions and credits to which they’re entitled.

When you do your taxes the right way, you can get the biggest tax refund possible. Here are seven practical tips to consider:

1. Deduct your deductions

Remember, a tax refund isn’t a freebie from the government. It’s your money! They’re just holding onto it for you – and using it as an interest-free loan in the meantime. Get the full amount you deserve by claiming allowable deductions. 

Deductions lower the amount of your income that’s subject to tax. Here are three common deductions for which you may qualify:

  • RRSP contributionsIf you contributed to an RRSP before the deadline (which is 60 days after December 31 of each tax year), then you can deduct those contributions. To see how much you contributed, simply check the tax slips provided by your financial institution. These will outline contributions made after the first 60 days of the calendar year for which you’re filing a tax return, up until December 31 of that tax year. An additional receipt will outline contributions made in the first 60 days of the subsequent calendar year. It’s a good idea to hang on to these receipts in case you’re audited – but you don’t actually need to submit them when filing!
  • Child care costs: Did you pay someone else to look after your little ones while you worked or advanced your education? Did you send them to a day camp or summer camp? The government lets you deduct up to $8,000 per child annually for children under seven years of age, or up to $5,000 per child for those aged seven to 16. For disabled children of any age who qualify for the disability tax credit, the maximum claim is $11,000. If the disabled child is 16 or older and does not qualify for the disability tax credit, the maximum claim is $5,000. Get more details about claiming child care expenses.
  • Home office expenses: In 2020, 2021 and 2022, if you worked from home because of the pandemic for at least 50% of the time and for four or more consecutive weeks, Canada Revenue Agency (CRA) allows you to claim certain work-related expenses. There are two ways to claim your deduction: the temporary flat rate method or the detailed method. Find out more about this opportunity to lower your income tax.

2. Claim your credits

A credit is an expense you can claim that’s different from a deduction because it doesn’t come off your income. Instead, credits are applied at prescribed rates against taxes payable. Unlike a deduction, a $500 credit is not the same as $500 off your taxable income. Also note that a non-refundable tax credit can only help reduce your taxable income or bring the amount to zero, so any excess credit may not be used to increase your refund.

Here are a few examples to look out for:

  • Interest paid on student loans: You can claim any interest on your student loans as a non-refundable credit. The tax credit (federal and provincial) is calculated by multiplying the lowest federal/provincial/territorial tax rate by the amount of the loan interest.

Pro tip: If you didn’t earn income in the past year, you should wait to claim the interest on student loans. You can carry forward that interest and apply it on any return for the next five years – just don’t forget about it!

  • Medical creditsThis is one non-refundable credit that people tend to overlook. It’s worth taking a moment to read through the different types of medical expenses that may apply to you. Depending on your circumstances, these could include ambulance transport, crutches, dental services, various tests, gluten-free products (if you are diagnosed with celiac disease), in-vitro fertility costs, laser eye surgery, and orthodontic work (if it’s done out of necessity, not for cosmetic purposes).

Pro tip: If you’re married or in a common-law relationship, it may be best for the partner with the lower net income to claim medical expenses. 

  • Charitable donationsThis is a popular one. Depending on which province you live in and how much you donated, you could qualify for a significant tax credit. At the federal level, you can be credited 15% on the first $200 you donated. Any donation amounts above that are credited at 29%. 

Meanwhile, each province has its own tax credit rate, which means you can be credited an additional 5.05% to 20% on the first $200 depending on where you live, and 11.16% to 24% on any amount above that.

  • Canada Training Credit: This is a refundable tax credit of up to $250 per year and $5,000 over your lifetime designed to help with the cost of training. To qualify you have to meet certain eligibility conditions, including filing your taxes, being 26 or older and less than 66 years old, and paying eligible tuition fees to a qualifying institution.

Pro tip: Again, it may be beneficial to wait to claim your non-refundable charitable tax credits, particularly if you don’t owe any taxes. These credits can be claimed on any return over the next five years. Alternatively, you may wish to transfer some or all of your charitable tax credits to your spouse/common-law partner, to reduce their tax liability.

3. Gather all of the information you need

In a rush to be done with tax time? We get it. But filing too early could cost you extra time and money later, particularly if you need to file all over again. Better to more patient, carefully check your figures and tax slips, and do it right the first time.

If you’re not sure you have all of the information you need, it’s best to wait.

Here’s are some of the different tax slips you might need when filing your taxes:

  • T4: Employment Income. Are you employed? Your employer will likely deliver this to you in January or February.
  • T5: Statement of Investment Income. This is for interest directly paid from a bank or money market fund, or dividends directly from a corporation. It’s not for income that comes from a trust (like an ETF).
  • T4RSP or T4RIF: Statement of RRSP Income or Statement of Income from a RRIF. If you withdrew funds from your RRSP, RRIF, LRIF or PRIF.
  • T4A: Statement of Pension, Retirement Annuity and Other Income. Most commonly for income received from a workplace pension plan, annuity or RESP withdrawal. It also includes income from temporary COVID-19 related benefit programs like Canada Recovery Benefit (CRB), Canada Sickness Recovery Benefit (CSRB) or Canada Recovery Caregiving Benefit (CRCB), as you must declare this income on your tax return, in will also reflect any COVID-19 benefit repayments you made in the tax year.
  • NR4: Statement of Amounts Paid or Credited to Non-Residents of Canada. Were you an expat during the tax year? You’ll get this slip if you are a non-resident of Canada and made a withdrawal from an RRSP, RRIF, LRIF, PRIF or RESP, or if you earned investment income from a non-registered account.
  • T5013: Statement of Partnership Income. You’ll receive this if you have investment income from partnerships.
  • T3: Statement of Trust Income Allocations and Designations. You’ll get this if you have investment income from mutual funds, or from certain trusts (like ETFs) in non-registered accounts.
  • T5008: Statement of Securities Transactions. This is for reporting details about securities that were disposed or redeemed. You'll receive this if investments were sold in a taxable account.

4. Carry forward your capital losses

If you have a non-registered investment account, you trigger taxable capital gains when you sell the investments that have gone up in value relative to the price you paid for them.

But when they go down in value… you can still win (well… sort of)! At least you can mitigate the effect of this loss. You incur a capital loss when you’ve sold an investment for less than what you paid for it.

Tried to put the loss out of your mind? Well, remember it at tax time. You can carry these losses forward and use them to help offset those capital gains or any future gains.

Your previous capital losses may be easy to miss if you don’t keep a record. Check your previous Notice of Assessment. If need be, you can also check the annual report or account statement from your investment dealer.

5. Crypto counts as well

As cryptocurrency continues to gain acceptance and popularity, maybe you’ve dabbled in the crypto market and made some trades of your own. Remember that gains and losses on transactions of digital assets should be reported on your income tax return, just as if they were a stock, mutual fund or other security. Learn more about the tax implications of trading in cryptocurrency.

6. Keep a record of everything for six years

This is a little less about maximizing your refund and more about minimizing pain if you’re audited by the CRA.

It’s not just something that happens to other people. There are plenty of exacerbating factors that may make you more likely to be audited.

So… what should you keep for six years? To start with, keep all those income tax slips mentioned earlier. If you’re self employed, you’ll also need to keep receipts of expenses for which you’re claiming deductions (e.g., entertainment, utilities and other costs associated with working from a home office). 

Not a paper person? There are dozens of good apps these days for quickly scanning and organizing that paperwork, so make use of them.

7. File your taxes online

Online tax software can help make filing easy and fast. There are different tax filing software services to choose from. 

Here’s one important reason why we recommend using software over the nostalgic paper package: you’ll make fewer mistakes and, if you do make a mistake, it’ll be much easier to correct. You’ll get prompts about which deductions you might be eligible for, and usually get some pretty useful, straightforward explanations for why they might work for you. Accuracy is important—and can make the difference between a good tax return and a great one.

Make good use of your refund

Remember, getting a tax refund isn’t an undeserved windfall: it’s your money that you’ve been lending to the government. The tips in this article may help increase the size of your refund. Before spending it all, consider how it can bring you closer to your financial goals. Now could be a great time to pay down debt or invest towards your goals and a more secure future. Make your refund work for you!