In a year where many Canadians experienced a change in their financial situation, owing money on taxes is the last thing anyone needs. This makes the upcoming tax season stressful — if not downright terrifying.
Luckily, there are a myriad of federal and provincial credits and deductions that can help, and even get some extra cash in your pocket! Understanding which benefits you qualify for and how they can work for you is the key to getting the most out of your 2020 tax returns.
In partnership with H&R Block, here are some of the main credits and deductions you should keep an eye out for.
Credits Vs Deductions
Before we jump into it, it might be a good idea to distinguish between the different kinds of credits and deductions there are, and what they mean for you.
Deductions: Deductions are amounts that are subtracted from your taxable income, dollar for dollar. Deductions are not money-in-your-pocket; rather, they may reduce how much taxes you owe by reducing the amount of income you are claiming.
Non-refundable credits: Non-refundable credits reduce your tax liability. They don’t put money back in your hand, but they lower the tax bill that you’d have to pay. For example, let’s say you owe $300 and you have $400 in non-refundable credits. In this case, you’ll no longer owe anything, but you won’t get the leftover $100.
Refundable credits: Refundable credits come at the end of your tax return and actually put money in your pocket if you have an excess. They can also be used to lower your tax bill. For example, let’s say you owe $500 and have $300 in refundable credits; you’ll now only owe $200. If you owe $200 and have $300 in refundable credits, you won’t owe anything anymore and will receive a $100 refund.
Now that we’ve cleared that up, let’s talk about the different kinds of credits and deductions you may be eligible to receive!
Expenses
There are different kinds of expenses that you can claim on your tax returns. Here are some of the big ones to keep in mind.
Medical Expenses
You can claim these expenses as non-refundable tax credits. Medical expenses include things like if you had to take an ambulance, if you have to pay for your prescriptions, if you pay for medical insurance, if you’re working and you and your employer each pay part of the premium, if you had to pay for braces or eyeglasses out of pocket and haven’t been reimbursed, etc.
But there are also a lot of medical expenses that you may be eligible for that don’t seem as obvious. For example, if you have celiac disease, you can claim the incremental costs associated with buying gluten-free food products. If you’ve been prescribed tools or equipment such as air purifiers, computer peripherals, hearing aids, medication that needs needles or syringes, wigs, and haven’t been reimbursed for them, you can claim the expense.
Due to the COVID-19 pandemic, many Canadians may have experienced changes in their health that required unforeseen expenses. It’s a good idea to go through the medical expenses page on the CRA website to find out if you can claim your specific expenses.
Childcare Expenses
You can claim these expenses as deductions if someone looked after a dependent child(ren) that lived with you so that you could work, attend school, or carry on a project for which you received a grant. These expenses include hiring a caregiver, paying for daycare centres, paying for day camps and sports schools where the primary goal is to care for children, and paying for boarding schools. You can read more about this deduction on this page of the CRA website.
Work From Home Expenses
If you worked from home in 2020 more than 50% of the time specifically due to COVID-19, you’re able to claim the work from home expenses as a deduction on your 2020 tax return. There are two methods to go about this: simplified and detailed.
The simplified flat-rate method requires you to fill out a T777S form. You’re allowed to claim $2 per day, for a maximum of 200 days, which means up to a maximum deduction of $400. You don’t need receipts, or anything signed by your employer. Just fill out the T777S form and file it with your tax return.
If your expenses totaled more than $400, you can use the detailed method, in which you claim the exact amounts you spent. In addition to the T777S, you’ll need a T2200S form signed by your employer which certifies that you worked from home due to the pandemic. You’ll also need the receipts for all of your expenses. For more information on which expenses you can claim and how to calculate them, visit this helpful H&R Block article.
Tuition
You can claim this as a non-refundable credit. If you’re over 16 years old and paid for a course in an educational institution in Canada that has not been reimbursed by an employer or a government grant, you may qualify for the tuition tax credit.
Speaking of tuitions, we would be remiss not to mention the Canada Training Credit. While this isn’t exactly an expense — as in it’s not something you’ve already paid for and can get a deduction on — it’s still an important credit to note and can be quite helpful come tax season. Starting in 2019, if you were between the ages of 26 to 65, had an income of at least $10,000, and were enrolled in post-secondary education or occupational training, you accrue training credit, which is a $250 refundable credit. 2020 is the first year that you can claim this credit if you were eligible for it.
Canada Worker’s Benefit
If your income is between $13,000 and $24,000, you may be eligible for the Canada Workers Benefit (CWB), which is another refundable credit. The CWB also includes a disability supplement for individuals who have an approved Disability Tax Credit Certificate on file with the CRA.
RRSP Contributions
You probably already know about this one, but it’s still a very big one to pay attention to. RRSP contributions are tax deductions which reduce your total income dollar-for-dollar, therefore reducing the amount of tax that you pay.
Charitable Donations
Charitable donations are non-refundable credits. This is another one that you probably already know about, but perhaps what you didn’t know is that you can save the receipts up to five years, then file them together so that you get the biggest credit in that fifth year.
GST Credit
When you file your tax return, you may qualify to receive GST payments based on your net income. Those are typically paid out in 4 payments throughout the year: the first payment comes in July as long as you filed your taxes by the April 30th deadline. You then receive a payment in October of the same year, and the remainder of payments come in January and April of the following year.
Provincial And Territorial Credits or Deductions
Most of the credits and deductions we’ve covered are federal, which means they affect all Canadians. But there may be specific provincial or territorial credits that you’re eligible for depending on where you live.
For example, if you live in Ontario, Manitoba, Saskatchewan, or Alberta, you may be eligible for the Climate Action Incentive, which is a refundable credit. Residents of Ontario may also be eligible for the Ontario Trillium Benefit, which is also a refundable credit. Under the Subsidized Childcare Program, residents of Québec can claim the basic contribution paid directly to the subsidized childcare service provider.
It’s a good idea to check the CRA website or your provincial website to find out which provincial or territorial benefits you qualify for, and make sure you’re claiming those additional credits and deductions!
Saving Your Receipts
Not all credits and deductions require you to submit a receipt when you file your taxes, but that doesn’t mean you shouldn’t ask for and save your receipts. In fact, you ought to be holding on to all your tax documentation (including receipts you didn’t file) for up to 6 years. This is very important to remember, as just because you received your tax assessment, the CRA may still ask to see certain documents down the line.
A good idea would be to take photos of your receipts and store them in a secure folder on your computer. That way, you’ll have backups in case the physical papers get misplaced!
H&R Block is here to help guide you through your most complicated tax year. No matter what your life or work situation is, or your preferred filing method, an H&R Block tax expert can make your taxes simple, helping you get through this year’s tax changes.