Student Loan Interest
Interest paid on student loans obtained under the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Apprenticeship Loans Act, or similar provincial or territorial government legislation for post-secondary education can be claimed as a tax credit.
If you do not use the credit for the year the interest is paid, the unused amount can be carried forward for up to five years.
Home Buyers' Amount
If you are a first-time home buyer, you may be eligible to claim a 15% non-refundable tax credit on up to $10,000. You may be considered a first-time home buyer if neither you nor your spouse or common-law partner owned and lived in another home (inside or outside Canada) in the calendar year of the purchase or any of the four preceding calendar years.
Home Accessibility Tax Credit
The Home Accessibility Tax Credit (HATC) is available for seniors (age 65 and older) and individuals who qualify for the disability tax credit. This credit allows these individuals to claim a 15% non-refundable tax credit on up to $20,000 of expenses incurred to perform a "qualifying renovation" on their home.
The renovation must allow the individual to gain access to, be mobile or functional within, or reduce the risk of harm to the individual within or in gaining access to the home.
British Columbia has a similar home renovation tax credit, which is a 10% refundable tax credit on up to $10,000 of qualifying expenses. Such expenses may also be eligible for the medical expense tax credit, providing a double tax benefit from claiming these expenses.
Digital News Subscription Tax Credit
From 2020 to 2024, individuals can claim a 15% non-refundable tax credit on amounts up to $500 spent on a digital news subscription with a qualified Canadian journalism organization. Note that only the cost of a stand-alone digital subscription will be eligible. If your subscription provides you access to digital and non-digital content, then only one-half of the amount paid will be eligible for the credit.
Canada Training Credit
This refundable tax credit aims to help workers between the ages of 25 and 64 and encourages them to pursue professional development. Individuals can accumulate $250 of credit room per year, up to a lifetime maximum of $5,000. The amount that an individual can claim as a credit in a particular tax year is equal to the lesser of 50% of eligible tuition and fees paid in a year and the accumulated room at the beginning of the year.
Charitable Donations
Charitable donations made by you or your spouse during the year should normally be added together and claimed on the income tax return of one spouse. A higher credit is available when total donations exceed $200, so combining the donations and claiming them on one return makes more sense. If your total contributions are less than $200, there is no advantage to claiming them on one return. The key to supporting your claim is to keep the official tax receipts.
If you donate to certain publicly listed securities, your donation credit is based on the fair market value of those securities. Furthermore, you will generally not pay tax on capital gains on the donated securities.
Donations can be carried forward for up to five years. If you find a donation receipt that was not previously claimed, bring it in to review with your Crowe MacKay tax advisor.
Medical Expenses
You may claim a non-refundable tax credit on medical expenses for yourself, your spouse, and dependent children. While either spouse can make a claim, as with charitable donations, medical expenses should usually be added together and claimed on the income tax return of one spouse (usually the lower-income spouse) to maximize tax savings. You are not restricted to claiming on a calendar year basis, as you can claim medical expenses for any 12-month period that ends in the year. Commonly missed expenses include:
- Dental bills,
- Eyeglasses,
- Private medical insurance (including certain travel medical insurance premiums), and
- Certain travel costs, such as travel to regional or provincial centres for treatment.
You may also claim certain expenses for an animal specifically trained to perform tasks to assist with post-traumatic stress disorder.
Medical cannabis can be claimed as a medical expense. However, individuals can only claim purchases from specific registered sellers. Purchases from other retailers may not be eligible.
Attendant Care & Nursing Home Expenses
For persons who qualify for the disability amount, attendant care expenses may be claimed for:
- Part-time or full-time attendant care in a self-contained domestic establishment (the person's home, for instance)
- Full-time attendant care in a nursing home
- Attendant care in retirement homes, homes for seniors, or other institutions
Attendant care expenses can be claimed as medical expenses to a maximum of $10,000 per year if the disability tax credit is claimed. However, there is no maximum amount if the disability tax credit is not claimed.
When the expenses are for full-time care in a nursing home there is no limit on the total attendant care expense that can be claimed as medical expenses, however, the disability tax credit cannot be claimed. It is recommended you get a detailed fee statement from long term care facilities to ensure appropriate expenses are claimed.
Disability Tax Credit
This credit is available to a person with a severe and prolonged impairment in physical or mental function subject to certain criteria. To qualify, the CRA must approve an application signed by your doctor or nurse practitioner. Areas that may apply include:
- Vision/blindness
- Life-sustaining therapy
- Impairment to physical functions such as walking, speech, hearing, and feeding
- Impairment to performing the mental functions necessary for everyday life
Recent changes to eligibility requirements should make the credit more accessible to those with an impairment to perform the mental functions necessary for everyday life. There has also been a reduction in the eligibility requirements for individuals undergoing life-sustaining therapies, reducing the frequency of treatment to two times each week; however, an individual must still receive therapy for a duration averaging not less than 14 hours a week. These recent changes have been enacted with a retroactive date and apply to Disability Tax Credit (DTC) certificates filed on or after January 1, 2021.
The DTC can be claimed retroactively for up to 10 years. A T1 adjustment can be filed to claim the credit for any tax years that have lapsed since the impairment began, as certified by your doctor.
Once a person with a disability has applied for and is deemed eligible for the disability tax credit, they may also be eligible to participate in a Registered Disability Savings Plan, which is discussed later in this newsletter.
Other credits may be available to those supporting certain family members who are dependent on them due to a physical or mental infirmity:
- Amount for infirm dependents age 18 or older
- Attendant care and nursing home expenses
- Canada caregiver amount
Teacher & Early Childhood Educator School Supply Tax Credit
The Teacher and Early Childhood Educator School Supply tax credit is a refundable tax credit. This credit allows an employee who is a teacher or early childhood educator and holds a recognized certificate or licence to claim a 25% refundable tax credit on up to $1,000 of purchases of eligible teaching supplies during the year.
What to do next?
Filing on time
The normal deadline for filing an income tax return for the previous year is April 30. This filing deadline is extended to June 15 if you or your spouse are self-employed. However, income taxes payable are still due on April 30. Similarly, the information return for "Specified Foreign Property" having an aggregate cost over $100,000 CAD at any time during the year (Form T1135) must be filed by the individual's filing deadline.
Taxpayers who do not file their income tax returns on time face significant late-filing penalties: 5% of the balance due plus 1% per month to a maximum of 12 months for the first offence, plus applicable interest on the penalty. The penalty can more than double where the taxpayer fails to file on time for a second time in three years and if a formal demand for filing has been issued by the Minister.
Interest and penalties are not tax deductible and add up quickly at the rates charged by CRA. Even if you cannot pay the amount of taxes due, ensure that you file on time.
Penalties for failing to report income
If you have income from several sources, make sure that you do not miss reporting any of it. By failing to report income on your return in the current year and in any of the three preceding years, you could be subject to federal and provincial/territorial penalties based on 10% of the unreported income, in addition to paying the understated tax liability on the unreported income. Interest applies on the unpaid amounts. We recommend that you ensure that you have information on all your income when having your return prepared.
Disclosing the sale of principal residence
Many Canadians are aware of the fact that they will likely not pay tax on the sale of their home as a result of the principal residence exemption. However, what some taxpayers are not aware of is that this does not relieve them of the requirement to disclose the sale to the CRA. If you sold your home during the year, you must file your personal tax return, completing Schedule 3 and Form T2091(IND). Failure to do so will result in penalties.
Tax instalments
Failure to pay quarterly income tax instalments when required may result in interest charges. It is possible to make catch-up payments and reduce or offset the interest charges. Contact your Crowe MacKay tax advisor if you are unsure if you are required to make tax instalments.
Importance of filing
Even if you do not have income to report, failing to file your return can put you at a financial disadvantage. Several benefits and social programs are issued to individuals based on the income (or lack thereof) reported in their filed tax return. For instance, the Canada Child Benefit is a tax-free monthly payment from the Government to assist eligible low-income families with the costs of raising children. In order to be considered for the benefit, you and your spouse must file your return every year. Guaranteed Income Supplement (GIS), GST/HST credit, and the Canada Workers Benefit are other benefits that are assessed and paid based on personal income tax filings.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
