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Competitive Edge Blog

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Maximize your Deductions: Top Tax Tips for Canadian Taxpayers Part 1

This year, with the record levels of inflation we have experienced and the continued rising costs of living, there are ways to avoid overpaying on your taxes.

Organizing your finances and preparing for your taxes in advance will give you ample opportunity to look for tax deductions, tax credits, and other rebates or benefits that will help you lower your tax bill and keep more money in your pocket.

  1. Compile your income slips such as T4, T4A, and T4E forms

  • This past year CRA has been especially focussed on missed or incorrect reporting of T4A income. Failure to report your income on the correct lines can result in CRA reassessing you and a new tax amount owing.

  1. Investing interest: When can you claim a tax deduction 

  • If you have a mortgage on a rental property or a loan that you used the proceeds to purchase investments that are in non-registered accounts, you can deduct interest paid on the loan.

  • Same if you are self employed, you can claim a portion of the mortgage interest as part of your office in home deduction.

  1. If You are self-employed. How much money should you be saving for taxes?

  • You are of course responsible for saving money to cover your tax bill. Keep in mind that if you are a sole proprietor, you will almost always owe money, even if you have extra tax credits and deductions such as tuition, childcare or are a single parent. This is because in addition to federal and provincial income taxes you are responsible for almost 12% in Canada pension plan premiums, no matter how many deductions or credits you have this CPP is always there.

  1. A small business (sole prop) you have more deductions available to you!

  • You can deduct several types of business expenses, if you're a business owner. It helps to keep track of your operating expenses throughout the year. Things like bank charges, miscellaneous office supplies, advertising and promo often get forgotten about.

  1. Maximize your Tax-saving strategies through investing

  • with TFSAs, you pay taxes on the money before you contribute, but gains in your TFSA are never taxed. With RRSPs, you reduce your taxes owing when you file your return and you pay taxes later on in life when you withdraw the money you contributed to your rrsp. To get the best result You should consider your current and projected income and investment timeline when deciding how to invest.

Until next time,

Christine Walters

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