Maximizing Your Canadian Tax Refund: What You Need to Know!

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Maximizing your Canadian tax refund? But how?

You’re working in Canada, you’re hitting the slopes, you’re munching on poutine and you’re making the most of your time there. But, oh no! What’s this? The deadline for filing your Canadian taxes is almost here… and you’re running out of time!

You may or may not know that the Canadian tax season is just around the corner. Yup, that’s right and the deadline is April 30th.

And what’s more – every single taxpayer in Canada, even those of you who are on a temporary visa (that includes you working holidaymakers) are legally obliged to file a tax return in case of any amount due to the CRA.

But before you start panicking, it might be a relief to know that there’s a good chance you’re entitled to claim certain expenses back – and you know what that means? A bigger Canadian tax refund!

If that’s music to your ears then read on and find out what kind of expenses can be claimed back…

First things first, you might be wondering who is entitled to claim these expenses…

Well, it’s simple, if you’ve earned over the tax-free allowance of ($12,069 for 2019) – then you are eligible to claim the costs of certain expenses meaning you can maximize your Canadian tax refund, ever further.

If you intend to use expenses to lower your overall tax liability, you must have the proper documentation for each cost, so be careful to keep all relevant receipts!

In order for an employment expense to be eligible, it must meet 2 conditions:

  1. Your employment contract requires you to pay the expenses
  2. You don’t receive an allowance to pay the costs or if you do receive an allowance, your employer adds it to your total income

Residents and non-resident

Some expenses are general and can apply to all taxpayers while others are territory specific. Territory specific credits and deductions can only be claimed by residents in Canada.

If you’re on a working holiday visa, you are not considered a resident. If you’re unsure of your residency status contact Taxback.com for more information.

What kind of general expenses count?

Medical Expenses

You can claim medical expenses and not just for yourself but for your spouse or common-law partner. You may also be able to claim for certain related persons.

If you have a qualifying medical expense, you paid for yourself or a spouse, you will need a receipt to claim the cost. The limit of the eligible medical expenses that you can claim should be 3% of your net income or $2,352, whichever is less. The tax credit is 15% of the amount remaining.

For example, you made $2,500 medical expenses in 2019 and your income was $78,500. The maximum medical expenses that you can use as a credit on your 2019 tax return is the lesser of $78500*3% = $2,355 and the limit of $2,352.

In this case, the limit is the lesser amount, so the maximum medical expenses you can claim is the amount of $2,352. The overpaid medical expenses $2500-$2352 = $148 can not be used as a credit on the income tax return.

Examples of qualifying medical expenses:

  • Doctor consultants
  • Nurses’ fees
  • Prescription drugs and medications
  • Premiums paid to private health services plans
  • Ambulance service
  • Dental services
  • Costs related to the purchase of gluten-free food for coeliac
  • Orthodontic work

Medical-related travel

If the medical services you need are not available to you within 40km of your home and you need transportation to a medical facility, you may be entitled to claim the transport costs.

If you had to travel at least 80km from your home, you can also claim accommodation and meal expenses.

Disability support deduction

If you have an impairment in physical or mental functions and you have paid for certain medical expenses, you may be entitled to claim the disability supports deduction under certain conditions.

If you are eligible for this deduction, you may be able to deduct the expenses that you paid so that you could:

  • work
  • go to school
  • do research for which you received a grant

Only the person with the disability can claim expenses for this deduction.

Moving Expenses

Have you moved from one place to another in Canada? You may be able to claim moving expenses. You must have started a job or carried out business at your new location and the new place must be at least 40km closer to your place of employment.

You can also claim eligible moving expenses. This applies if you moved to be a student in full-time attendance in a post-secondary program at a university, a college or another educational institution.

Again, your new home must be at least 40km closer to your new place of work or education.

Public Transport

You may be able to claim the cost of your monthly or yearly public transit passes made before the 2018 tax year. For the 2017 tax year, the CRA has only approved costs for monthly public transport passes made before July 2017.

So, basically, you may be entitled to claim a 15% non-refundable tax credit for the cost of eligible transit passes that are for the use of public transit services for the period January 1, 2017, to June 30, 2017, on your 2017 income tax and benefit return. This includes annual and monthly passes, as well as weekly passes and electronic fare cards that are used on an ongoing basis.

You may also claim the cost of eligible public transit passes for the use of the transit services by your spouse or common-law partner or their child who is under the age of 19 at the end of the tax year.

But not if you have already paid for your annual transit pass for the period of January to December 2017, in this case, you won’t be eligible to claim a tax credit for the full amount that if paid before July 1, 2017.

Shorter passes may also be deductible as long as they allow you to have unlimited travel for at least 5 consecutive days. You must also have sufficient passes for unlimited travel for at least 20 days within a 28 day period.

These passes must allow unlimited travel within Canada on:

  • local buses;
  • streetcars;
  • subways;
  • commuter trains;
  • commuter buses;
  • local ferries.

You can also claim the cost of short-term passes providing,

  1. each pass entitles you to unlimited travel for at least 5 consecutive days;
  2. and you buy enough of these passes for unlimited travel for at least 20 days in any 28-day period.

Electronic payment cards can be claimed if,

  1. the card is used to make at least 32 one-way trips over a maximum of 31 consecutive days, and
  2. the card is issued by a public transit authority that records and provides a receipt for the cost and usage of the card.

*ride/trip passes are not eligible for this credit as they do not provide for unlimited travel.

Again, if you want to claim a tax deduction for these costs, you will need to keep all of your passes and documents in a safe place for future reference.

Business expenses

This only applies if you’re self-employed in Canada – you may be able to claim a number of business expenses on your tax return.

In general, it’s possible to deduct any reasonable expense you incurred in order to earn your business income. This includes:

  • Legal and accounting fees
  • Telephone and utilities
  • Travel
  • Meals and entertainment
  • Insurance
  • Property taxes
  • Motor vehicle expenses

Make sure you keep receipts in case you are the subject of an audit.

Tuition expenses

If you study in Canada, you can claim certain expenses as a tax credit. Generally, a course qualifies if it was taken at the post-secondary level or (for persons 16 years of age or older at the end of the year) if it develops or improves the skill in an occupation. So long as the educational institution has been certified by Employment and Social Development in Canada.

Also, you must have taken the course within the tax year you’re applying for. After you pay your tuition, you should receive a T2202, Tuition and Enrollment Certificate from the educational institution you’re attending. You can then use this form in order to calculate your eligible tuition fee credit.

Not all fees can be claimed. To qualify, the fees you paid to attend a Canadian educational institution must be more than $100.

You must claim your tuition amount first on your own return, even if someone else paid your fees. However, you can transfer up to a maximum of $5,000 of your 2019 unused tuition amount to your spouse/common-law partner or to your or your spouse’s or common-law partner’s parent or grandparent.

Even if you have no tax to pay or income from Canada, but you’re transferring part of your tuition amount, file your return. That way your records within the tax office are properly updated with your unused tuition amount available to carry forward to other years.

If you’re transferring an amount to a designated individual, transfer only the amount this person can use. That way, you can carry forward as much as possible and use it in a future year.

Keep in mind, if you carry forward an amount, you won’t be able to transfer it to anyone. You must claim your carry-forward amount in the first year you have to pay federal tax in Canada.

Donation expenses

You can also claim donations that you or your spouse/common-law partner have made. All the eligible amounts of your donations to registered charities or other qualified donees made during the tax year. You can also claim donations made in any of the previous 5 years that you have not claimed before.

You do not have to claim the donations you made in 2019 on your 2019 tax return. It may be more beneficial for you to carry them forward and claim them on your return for any of the next five years. No matter when you claim them, you can only claim them once.

Interest paid on student loans

Under the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Apprentice Loans Act, or similar provincial or territorial government laws for post-secondary education, you can claim loans.

Only you can claim an amount for the interest you, or a person related to you, paid on that loan within the tax year or the preceding five years.

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Note that you will lose the right to claim interest paid on a student loan in case you combine it with another kind of loan.

The same applies if you renegotiated your student loan with a bank or financial institution or included it in the consolidation of your loans, the interest on the new loan does not qualify for this tax credit.

In addition, you cannot claim the interest you paid because of a judgment obtained after you failed to repay a student loan.

Annual union, professional, or like dues

Whether you are required to pay union dues depends on your governing labor code, your collective agreement, and union.

Annual union dues can include the following amounts related to the employment that you paid (or that were paid for you and included in your income) in the year:

  • annual dues for membership in a trade union or an association of public servants
  • professions board dues required under provincial or territorial law
  • professional or malpractice liability insurance premiums or professional membership dues required to keep a professional status recognized by law
  • parity or advisory committee (or similar body) dues required under provincial or territorial law.

Note that the annual membership dues do not include initiation fees, licenses, special assessments, or charges for anything other than the organization’s ordinary operating costs. You cannot claim charges for pension plans as membership dues, even if the receipts show them as dues.

That’s just about everything you need to know about claiming back expenses on your Canadian tax return.

You can file your tax return yourself, but if you find that it’s all a bit confusing, contact Taxback.com. Their highly trained tax agents will ensure you avail of every expense and relief you’re entitled to– after all, Taxback.com guarantees the highest Canadian tax refund legally possible!

Updated Feb 14, 2020

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