Hey it’s Thomas here!
By now most of you should have
finished your tax filing already.
Did you have to write a cheque back to CRA?
Or did you get some tax refund?
Because in this video,
I’m going to talk about 9 Ways that
you can generate more tax return in Canada!
So Trust me!
You don’t want to miss out!
Oh and if this is your first time here!
Welcome!
This channel is to help Canadians make better choices on
Retirement Wealth and Insurance
My goal is to make sure you take 1 or 2 ideas home
And start making better financial decisions today
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Let’s get started!
Now you might be asking,
why should I think about this now
since I’ve already done my tax return?
Here is the truth,
CRA is the house and the house always win.
And the only thing you fight this is time.
Most of the tax saving strategies
requires a longer period of time to exercise.
So don’t wait until the last minute
to learn how you can save more taxes!
And Before we get started,
always the disclaimer first
I am not an accountant
This is not a video encouraging you
to DIY your tax filing
Or a video giving you any tax advice
This is a video highlighting tax deduction area
that you might want to know
So make sure you do your own due diligence
And talk to a professional accountant to
see what other areas might apply to you
when it comes to generating more tax return
If you want to learn more about
how tax filing works in Canada
I have a video on that too for you to check out
Let’s dive in
I’ll start with the home office deduction first
And the new temporary flat rate method that
was introduced in 2020 due to the pandemic
Now keep in mind this one
could be different for next year
But seeing how the year is currently going
and with so many Canadians working from home still,
We should expect that there may be
a benefit again for next year.
The new temporary flat rate method
lets you claim $2 a day
for each day you worked from home
With a maximum of $400 or 200 working days
Assuming you work a 9-5 job,
and 5 days a week
To qualify for this benefit,
you must have worked from home due to COVID-19
Or your employer had required you to do so
You must have worked from home
for more than 50% of the time
for at least four consecutive weeks
And any expenses you’re claiming must have been
used for work-related reasons during this period
With the flat rate method,
you don’t need to calculate the size of your workspace,
Don’t need to keep supporting documents
or submit the Form T2200.
There is also a detailed method
for home office deduction too
Which allows you to claim the actual amounts you paid
Such as electricity, heat, water, home internet access,
rent, maintenance and minor repair costs
And if you are a considered a commission employee,
You can also claim home insurance, property taxes,
lease of equipment
Like a cell phone, computer, laptop, tablet
any item that is related to
earning your commission income
To qualify for that,
Your employer must provide you with a completed
and signed Form T2200S or Form T2200
Keep in mind there are some limitations as well
so be sure to check the CRA site for the
most up to date information on the limitations
But if you think you’ll want to go down this route,
Make sure you keep all your receipts for records
You won’t need to submit it when filing your taxes
but you will need to keep it for 6 years
in the case you are audited
The second way is to get more tax return in canada
is to contribute to your RRSP,
or your registered retirement savings plan
I talk a lot about RRSPs here on my channel
So be sure to check out some
of my other videos on this topic
But I can’t stress enough how your RRSP
is a great way to lower your tax bill
And that also means a larger tax return
in April to a normal 9-5 employee
Your contribution limit is 18% of
your earned income from the last tax year
And you can carry over unused amounts
from the previous years
A common question is
what tax bracket is high enough to make
contributing to your RRSP worthwhile
There are many layers of tax brackets
that include both provincial and federal
I always keep things simple,
so i breakdown into three tiers
The first tier is an annual income up to about $40k,
in this tier doing RRSP might not impact that much,
maybe it’s more beneficial to do TFSA
The second tier is between $40K to $80k,
if you have extra cashflow that you put aside,
then RRSP is a great place to save.
And the third tier is an annual income above $80k,
you definitely want to look into RRSP
Now let me illustrate you an example
on how it impacts your taxes
If you earn $70k a year,
you can expect to pay $13,000 in taxes
plus CPP and EI
However, if you put $10k into your RRSP,
you will now reduce your taxable income to $60K
And your tax bracket will drop to 16%
so you are paying $9,600 instead
Saving you $3000.
And that’s almost a month of
the take home paycheque.
but what if you max out your rrsp already
and you still want extra tax deduction.
Then you can use line 22100 carrying charge
and interest expenses to help
There are a few things you can use
to deduct your taxable income.
What’s the most interesting one is
when you borrow money to invest,
as long the investment yields interest and dividends,
100% of the interest is taxable write off.
So for example.
Today say you borrow 100,000 from the bank
and invest in stock market.
With today’s borrowing interest rate is sitting at 3 - 4%
which means each year you are paying
$3,000 - $4,000 a year.
That interest is 100% fully write off,
just like putting into rrsp.
And if the investment is doing well say 8%,
you get 8,000.
double of what you initially put in.
So if you used the strategy right,
this not only help you to reduce your tax and
at the same time it can boost your rate of return!
But please make sure you seek out for help
to see if you are qualified for
this investment loan strategy.
I also have a video for more detail!
Be sure to check it out!
The fourth benefit to generate more tax return
is for those with children
Allowing you to claim up to $8000
for kids under 7 years old,
And up to $5000
for kids between 7 and 16 years old
Childcare expenses are eligible to claim include
daycare, summer camp, nannies, etc
Be sure to save these receipts throughout the year!
You will need to file your taxes each year
if you would like to get benefits
Like the GST/HST credit and
the Canada Child Benefit or CCB too
The GST/HST credit is not just
for those with children
You are eligible if you are a Canadian resident
and must be at least 19 years or older,
You have a spouse or common-law and
you are a parent who lives with their child
In addition,
it’s for those with low to moderate incomes
For singles,
you must make less than $47,527 before tax
Or if you are married,
your annual net income must be less than $62,747
The next benefit are medical expenses
That you can claim was non-refundable tax credits
However,
the eligible amount is 3% of your net income or
The set max for the tax year,
whichever option is less
For example,
in 2020 the set max was $2,397
Eligible expenses include dental, laser eye surgery,
private insurance premiums and more
You will be required to keep
your receipts and prescriptions
You can also claim expenses for you and
your spouse, common-law partner or
children under 18 years old
For example,
if Tom’s net income is $60,000,
the 3% threshold is $1,800
If Tom spent $1,200 for laser eye surgery in April,
he will not be able to claim the expenses
However,
Tom decides to go to physio which costs $1000 so
He can claim both his eye surgery and his physio now.
You might be surprise how this can help you
to treat yourself with the tax money.
Another benefit is vehicle expenses
But only if you are self-employed
and use your car for your business
Then you are able to claim expenses like your gas,
insurance, license, maintenance,
And more
If you also use your car for personal use,
you can only write off
the portion used for your business.
You’ll need to keep a record your mileage,
date and purpose of your trip.
If you are lazy,
you can use an app to track it.
I will put the link below too.
You’ll need to also keep your receipts
throughout the year
And by the way if you are a business owner,
I can share another 9 strategies
to help you to reduce your corporate tax!
Just reach out to me if you are interested!
The next benefit is interest paid on student loans
Which is obviously eligible to those
who are or were students
However,
there are a few restrictions
You can only claim interest payments on loans
received under recognized student loan programs
You cannot claim the interest on loans
from anywhere else,
Even if they were used towards your education.
This claim is considered a non-refundable tax credit
That means it can lower your tax bill
But you do not receive a tax refund
You can also carry forward your
student loan interest for up to five years
So you can be strategic with it by saving the claim
for a year when you might owe taxes
8)
Another overlooked tax deductions are
charitable and political donations
These can add up in a year if you’re
making donations here or there
to different organizations
You can receive a 15% credit on the
first $200 of donations you make
Which is equivalent to $30
And a 29% credit on donations above $200
Up to a max of 75% of your income for the year
Keep in mind you will need a tax receipt
from the charitable organization
You are also able to receive tax credits
for any donations you make to federal or
provincial political parties and candidates too
The next overlooked tax deduction
is moving expenses
You can claim this if you have to
move to work or run a business,
Or you need to move because you need
to study as a full-time student
enrolled in a post-secondary program
And you need to move as least 40 kilometers
closer to your new work or school
Some of the eligible expenses include
Transportation and storage costs,
travel expenses,
temporary living expenses up to 15 days,
Cost of canceling the lease,
or cost of selling and buying your home and more
Similar to the home office expenses,
there are two calculation methods for this claim
With one simplified method and a detailed method
and let me give you one more as a bonus,
You can also reduce your tax bill
with employment expenses
Like professional association fees,
union fees, membership fees,
And insurance premiums that are
related to your profession
Or expenses you might have paid
for your employment income
Like your cell phone bill, supplies and more
For expenses like those,
it must be in your employment contract that states
you need them for your work but your employer
does not provide you with allowance for them
There are also other benefits for certain professions
Like transportation employees,
forestry, tradespeople or artists.
Talk to your accountant to see
if you can claim any of those?
As you can tell,
these are dedicated for each Canadian’s personal tax.
Pretty much everyone can use at least half of the list.
Question is, did you really look into it?
Or at least talk to accountant about it?
Because this can literally can give you
thousands of dollars in tax return
Alright,
I hope you enjoy this video!
If you have any questions,
please leave them in the comments below!
This is Thomas
and I’ll see you in the next video