So you want to save money in 2024? One of the best ways to do that is to claim all of the tax deductions and credits you’re eligible for. If you add up all the deductions and credits you’re eligible for, you may be able to reduce your tax bill by $1,000, as well as receive a generous refund. In this article, I will explore the many CRA tax breaks that are available to Canadians for the 2023 tax year.
Dividend tax credit
The dividend tax credit is one of two tax breaks available to Canadian investors. The other is the capital gains tax credit. The way the dividend tax credit works can be explained with reference to Fortis Inc (TSX:FTS) stock. Fortis is a dividend stock with a 4.35% dividend yield. Let’s imagine you hold a $100,000 position in Fortis, which will have paid you about $4,350 in dividends this year. Now let’s say your marginal tax rate is 33%, and you have a $10,000 tax bill before the dividend tax credit is subtracted. What happens is, your FTS dividends are “grossed up” by 38% to $6,000. Then, a credit of $900 is created based on this fictitious $6,000 “grossed up” amount. Finally, the credit reduces your $10,000 tax bill to $9,100. Fun!
RRSP contributions
RRSP contributions give you a tax deduction when you make them. If you have $10,000 in pre-deduction taxes owing, a 33% marginal tax rate, and $2,000 in RRSP contributions, you get $666 off your tax bill, reducing your tax bill to $9,334.
Work-from-home deductions
Although the COVID-era $500 tax credit for home-based employees has been phased out, it’s still possible to claim some work from home expenses. If you are self employed, you can claim your entire workspace, provided that it was used exclusively for work. If you’re conventionally employed, you generally can’t claim an entire workspace, but you can deduct items that you spent money on directly for work.
Disability tax credit
The disability tax credit is a 15% credit on the costs you incur because of a disability. Your disability has to be “severe” for you to claim this credit. You can claim $8,800 for yourself and $5,200 for an eligible dependent. If you claim the full $8,800 amount for an adult, you get $1,320 slashed off your tax bill.
Tuition fees
Tuition fees have a simple tax credit applied to them. You get 15% of the amounts spent on tuition and textbooks as a tax credit to reduce your taxes. If you take an informal training course whose fees don’t count as “tuition” in the usual sense, you may be able to claim that amount as a deduction.
GST/HST tax credit
Last but not least we have the good old GST credit. This isn’t really a tax break that you need to keep up with and apply for. Instead, you get a certain amount of money sent to you if your income is below a certain threshold. For 2023, the threshold is $52,255. If you earn more than that amount you may be able to make yourself eligible by making RRSP contributions, as such contributions reduce your “on paper” income.
