Every year at tax time, many of us are eager to find ways to reduce our amount owing to the government. One way to achieve this is by identifying tax credits and deductions. These are typically things a taxpayer has spent money on over the course of the year, with a certain amount subtracted from their taxable income (deductions), or their tax owing (credits). By reducing your taxable income, you’ll pay less in total tax, and may even qualify for a lower marginal tax rate.
So, what qualifies as a tax credit or deduction? There’s a wide range of eligible expenses, some of which you may not be familiar with. Take a look at this list to see whether you can use some of these lesser-known credits and deductions to reduce your tax bill this year.
Home office expenses deduction
Millions of Canadians left their offices in March 2020 and haven’t returned, working from home to stay safe and help prevent the spread of COVID-19. In response, the Canada Revenue Agency is allowing those who worked from home last year to deduct up to $400 from their taxable income.
For 2020 only, people who worked from home at least half the time for a minimum period of four consecutive weeks are eligible for this deduction. Taxpayers can claim $2 for each day worked from home during that four-week period. Those who qualify can claim an additional $2 per day for any other days spent working from home because of the pandemic, up to a maximum of $400.
The deduction is available to anyone who worked either full-time or part-time hours at home in 2020 and did not receive employer reimbursement for the full cost of home office expenses. However, the rules prohibit workers from claiming the $2 for any day they were on leave, vacation, or off work because of illness.
If you start a full-time post-secondary education program or a new job in a different place and move to a home that’s at least 40 kilometres closer to your school or place of employment, several of the costs associated with that move qualify as tax deductible. These include the costs of hiring movers (including insurance), up to 15 days of temporary accommodation costs, and incidental costs such as changing your address on legal documents, replacing driving licences and non-commercial vehicle permits, and utility hook-ups and disconnections.
If you’re unable to sell your old home immediately after moving, you can also claim costs such as property taxes, insurance, and heating and utilities costs, up to a maximum of $5,000. When you do sell your old home, you can deduct advertising costs, the commission paid to your realtor, even any mortgage penalty fees that may apply.
Moving expenses are limited to the income earned at your new job. However, if you move late in the year and don’t earn much in your new role, you can carry unused deductions over to the subsequent tax year.
Digital news subscription tax credit
If you subscribe to a qualified Canadian journalism organization’s digital news reporting, you may be eligible for a tax credit based on the cost of that subscription. To qualify, the news organization cannot be a broadcaster, and the subscription must allow the individual to access digital content that is primarily original written news.
The credit amount is determined by multiplying the lowest personal income tax rate of 15 percent by the total amount paid for qualifying subscription expenses, up to a maximum of $500.
Day camps and summer camps for kids
Most parents probably know they can deduct some of the amount they spend on daycare each year, as long as they use the time their children are being looked after to work, run a business, or get an education. The deduction limit is $8,000 per year for kids under seven, and $5,000 for kids aged seven to 16.
What some parents may not know, however, is that other types of childcare costs are also legitimate deductions. If you send your kids to camp when school is out during the summer months so you can keep working or taking classes, those costs also qualify as tax deductible. Same goes for babysitting costs, as long as you’re hiring someone who’s not a sibling or grandparent, and you’re using the time to work or get an education.