The Canadian tax filing checklist

When you hear the words “tax time,” do you cringe? Or see a once-a-year opportunity to improve your financial picture? We challenge you to roll up your sleeves and see if any of the ideas below could help you save money this tax season.

The world is awash with tips and hacks on saving and growing your money. But Georgia Swan, Tax and Estate Planner, TD Wealth, wants you to know that tax time may represent the year’s most overlooked opportunity to make a positive change in your finances.

“Making sure you have looked at all the credits and things that you’re entitled to is part of being in control,” Swan says. “Benefits like the GST tax credit, the child tax credit, for example. Ensuring that you have applied for all of the different credits and deductions that are relevant can save you money and improve your situation.”

She also points out the importance of being organized and methodical: “I think it goes without saying that actively planning your approach to tax filing is essential. Unfortunately, we get into situations where people are sort of scrounging at the last minute to scrape together a tax return.”

In MoneyTalk’s annual tax checklist, we bring you up to date with recent tax changes you should know about and remind you of some key credits and deductions that may be available to you. As Swan emphasizes, the more effort you put into organizing yourself for tax filing, the more money you could potentially save.

Getting organized and finding receipts may not sound alluring but these are the savvy money moves could outrank any tricks you may hear about. Before you file, check out our helpful guide.

What’s new this tax season?

“Working from home” expenses: For the 2023 tax year, the federal government has removed the “flat rate method” of claiming home office expenses. Introduced during the COVID-19 pandemic, it offered a convenient way for employees to claim expenses incurred while working at home. You can still submit home office expenses, but now must submit form T2200 and have your employer document that you are required to work from home.

First Home Savings Account: The FHSA was introduced last year as a way to ease the path toward home ownership for many Canadians. If you opened an FHSA, remember to claim your contributions — to a maximum of $8,000 — on your tax form which can help lower your taxable income.

Alternative Minimum Tax (AMT): The Alternative Minimum Tax is designed to prevent high income earners and trusts from paying little or no tax. Nothing changes in 2023 but starting in 2024, it is expected that the previously proposed AMT changes will come into effect. The tax rate will increase from 15% to 20.5% and the basic AMT exemption amount will increase from $40,000 for individuals to approximately $173,000 (the threshold of the fourth federal tax bracket in 2024). This will not impact the large majority of Canadians but for those who use capital gains as a main source of income, there may be significant financial and tax planning needed to manage this change. It may be worth consulting a financial advisor or a tax lawyer.

New reporting rules for trusts: Recent government legislation has stated that all trusts must file a T3 Trust Income Tax and Information Return for any tax year ending after December 30, 2023 unless specific conditions are met. While there are no new tax consequences, the new rules require that the beneficiaries of the trust be documented. Swan says most people will need professional help filing their T3 Return and that may mean budgeting extra fees for your accountant or lawyer. Swan points out that many Canadians could fall under these reporting rules without realizing it. For example, family members who share a bank account could actually be seen by the CRA as entering a type of trust called a Bare Trust. While the CRA indicated that Bare Trusts that file late for the 2023 year will not incur penalties, you should consider seeking professional advice if you think you might be impacted.

“A lot of people are going to get caught unawares by this,” Swan says. “Unfortunately, this is not something that people can do themselves: It’s a question of law.”

For more information, check out New Trust reporting rules: surprising ways you could be impacted.

Multigenerational Home Renovation Tax Credit: The intention of this tax credit is to help families build a separate unit for an elderly relative or family member with a disability in their home. The credit is sizable — $7,500 or 15% on renovations up to $50,000 — so it could be well worth pursuing. The CRA has specific requirements both for the renovation and who qualifies for it. For more information, you should consult your tax planner or see the CRA’s information page.

New Tax-Free Savings Account limit for 2024: The annual contribution limit rises to $7,000 for 2024. Although this is not strictly a tax return item (you do not need to report your TFSA contributions on your tax return), you may want to consider how to best allocate your contributions between an RRSP and TFSA for optimal tax efficiency. To find out more about your personal RRSP limit or to check your TFSA contribution room, you can log into My Account on the CRA website.

When are the tax deadlines? What are the new limits and thresholds?

The 2024 filing deadline is Tuesday, April 30

That’s the filing deadline for those who are not self-employed. For those with self-employment income, the tax filing deadline is Monday, June 17 (because June 15 falls on a Saturday). It’s important to note, however, that any amount owing on your taxes must still be paid on or before April 30.

When do I get my T4 slip and other documentation?

The CRA says T4s should be available by the end of February. T3s (Statement of Trust Income Allocations and Designations) and T5013s (T5013 Statement of Partnership Income) slips are generally sent before the end of March. If you have changed jobs or moved or haven’t received proper documentation to complete your tax form, check out these CRA instructions.

What is my Basic Personal Amount (BPA) limit?

The BPA is a non-refundable tax credit that can be claimed by all individuals. This year the BPA is set at $15,000. Starting in 2024, this amount will be indexed for inflation (a new innovation this year).

How much can I contribute to my RRSP?

Your annual RRSP contribution limit is 18% of your 2023 earned income, to a maximum of $30,780, less your pension adjustment if applicable, plus any unused RRSP room from previous years. RRSP contributions made up to February 29, 2024 will be attributed to your 2023 limit. Planning for a strong contribution can be an informed tax move, says Swan, as it could help reduce your 2023 taxable income today while saving money for retirement down the line. She points out, however, that withdrawals from a Spousal RRSP could be subject to attribution rules if they are withdrawn within three taxation years of the contribution. That means the withdrawn funds would be included as taxable income for the contributing spouse.

To find out more about your personal RRSP limit, you can log into My Account on the CRA website.

What are the new tax brackets?

Tax brackets can be important for tax planning, particularly if you are at the lower end of a bracket. Through credits and deductions, you may be able to push your taxable income into a lower taxable bracket. Contributing to an RRSP also lowers your taxable income. The following figures may help you decide how much more you can contribute to your RRSP for the 2023 tax year.

Federal income tax rates for 2023

What are the maximum pensionable earnings?

The maximum annual pensionable earnings increased to $66,600 for 2023, with the basic exemption amount remaining at $3,500.

Credits and deductions: Find out what applies to you

Tax deductions lower your taxable income while tax credits lower the tax you must pay. There are a host of different credits and deductions available but you can do your own research (or work with a tax accountant or lawyer) to ensure you are claiming everything you can, says Swan. Here are some notable credits and deductions that are available.

Child Tax Benefit: This helps manage the costs of raising a child and is available to those who are primarily responsible for caring and raising a child.

Disability Tax Credit: For those with mental or physical impairments and their families.

Canada Training Credit: This helps with the cost of eligible training and tuition fees. It is available to people between the ages of 26 and 66 years old at the end of the tax year.

Canada Caregiver Credit: This is available to help offset costs associated with supporting a spouse or common-law partner with a physical or mental impairment. The credit is also available for those supporting some family members. Check here for eligibility.

Moving expenses deduction: This is available if you moved for employment purposes or to run a business, though there are stipulations. You can check eligibility here.

Medical expenses: Swan says there is a myriad of tax credits and deductions available for medical services, products and even some special diets. Many require a prescription, and some involve submitting the Disability Tax Credit Certificate (which Swan notes can take several months to process, so it’s best to submit it well before tax time). In some cases, snowbirds who incurred costs south of the border may be able to claim certain medical expenses.

If you purchased your first home in 2023

If you purchased your first home in 2023 you may claim up to $10,000 of your purchase via the First-Time Home Buyers’ Tax Credit (HBTC) and receive a return of up to $1,500. To be eligible, the home must be registered in your name or that of your spouse or common-law partner, and the home must be located in Canada. While this tax credit typically applies to first-time home purchases, it could also apply if this is the first home you’ve owned during the preceding four years (plus the year of acquisition). Visit the CRA website for more information and eligibility requirements.

The Canadian Dental Care Plan

This new program is not strictly an item you need for tax filing but you should be aware of it. It’s for families earning less than $90,000 with children who may not have access to private dental insurance. Tax-free payments to help subsidize dental expenses are available for each eligible child.

The program is also rolling out now for older adults.

More information is available on the CRA site.

If you hold U.S. assets

If you hold certain kinds of foreign property, with a combined cost of more than CDN$100,000 (including securities and rental properties), you’ll need to file a T1135 form with your tax return. The key word here is “combined.” You must report the total cost of all foreign assets, not each asset individually. Swan reminds people that the value needs to be based on the exchange rate used when the asset was acquired, rather than the current exchange rate.

As well, if you rent out your foreign property, you must file tax returns in both countries. Speaking to a cross-border tax specialist could help ensure you file properly and on time. The deadline for U.S. filing is Monday, April 15.

A closing thought on tax filing

Swan says that people should reframe tax time from being something they dread to something that can have a beneficial impact on their money situation.

“I think that is an unfortunate misunderstanding,” she says. Many of us think we are just filling an annual form. But we should be making sure that we are claiming everything we qualify for, Swan says.

“People have to realize there is money on the table in this situation, but you have to recognize it’s there first. Then make an effort to get everything you are owed.”

DON SUTTON
MONEYTALK