It’s already tax season! Like everyone else, you’d like to pay as little as possible and why not, receive a nice cheque from the government. In order to maximize your tax return, you need to know the deductions and tax credits you are entitled to. You’ll be amazed at all the ways you can legally save money.
We recommend that you work with a firm that has developed an expertise in working with health professionals and that is aware of all the tax changes related to your health profession. This will allow you to devote yourself to your practice with complete peace of mind.
Here are some tips to help you prepare and reduce your taxes this year.
How do you prepare for tax season?
Every year, you wonder what documents to give to your accountant. Between receipts, invoices and more, it’s not always easy to know what to keep. To help you find your way around, we’ve prepared a checklist to help you prepare for tax season. It’s a list of documents that you should send to your accountant.
By providing all the necessary documents, you will help them maximize your tax return. Don’t forget to check your email inbox for any receipts that may have been sent to you electronically, as well as your federal and provincial online records.
How to maximize your tax return?
There are plenty of legal ways to pay less tax. You can take advantage of tax deductions and credits.
Contributing to an RRSP is by far the best way to reduce your taxable income, and therefore your tax rate. In fact, these contributions are deductible from your income.
The maximum amount you can contribute to an RRSP for the current year is $27,230. But don’t forget that there is a limit of 18% of your current year’s earned income, plus unused RRSP contribution room from previous years.
First-time homebuyer: HBP
If you and your spouse are first-time buyers, you can each withdraw up to $35,000 from your RRSPs for the down payment without paying taxes. This is called the Home Buyers’ Plan (HBP).
First-Time Homebuyers’ Tax Credit
If you purchased your first home in Canada within the last year, you can receive a non-refundable tax credit* of up to $750 at the federal level and $626 at the provincial level.
Tax credit for child care expenses
Balancing work, family and school is not always easy. Sometimes you need an outside helping hand to make it happen. The good news is that if you have had your child cared for in order to work or attend an eligible educational institution (full or part-time), you can claim a refundable tax credit* for child care expenses.
However, the reduced contribution paid for child care services provided by an early childhood center, a family day care or a daycare centre, or for basic school-based child care services does not give rise to a tax credit.
Note that as of January 1, 2020, due to the pandemic, courses offered online are also eligible for this credit.
Canada Training Credit
Have you gone back to school or are you planning to? The Canada training credit is a new refundable tax credit for eligible tuition and other fees paid for courses taken in 2020 and beyond. If you are between the ages of 25 and 65, starting in 2020, you can earn $250 each year federally to a maximum of $5,000 over your lifetime as a training credit.
Note that this credit does not replace the tuition tax credit at all. You can claim both. However, in calculating your tuition tax credit, the Canada training credit for that year will be subtracted from your tuition and other eligible fees paid for the year.
If you attended a post-secondary educational program at an educational institution, you can claim the non-refundable tuition tax credit. Fees paid for an examination required to become a member of a professional association are also eligible.
Medical Expense Tax Credit
You can claim a non-refundable tax credit if you have paid medical expenses (dental care, eyeglasses or contact lenses, private health insurance, etc.) that exceed 3% of your net income.
Please note that only the portion not reimbursed by insurance is considered in the calculation. Services provided for purely cosmetic purposes are not eligible.
Generosity pays off! If you have made a charitable donation, you can claim a tax credit. To do so, you must have an official donation receipt. Only Canadian registered charities or other qualified donees can issue official donation receipts.
Union or professional dues
Membership fees for your professional association or union are eligible for a non-refundable tax credit. Some employers include the information directly on the tax forms. But in other cases, you have to do it yourself.
Digital News Subscription Tax Credit (DNSTC)
If you paid for a digital news subscription service from an eligible Canadian journalistic organization, you can claim a non-refundable tax credit of up to $500.
Ultimately, depending on your situation, you may be entitled to several tax credits. When it comes to taxation, there are many subtleties that only a professional can understand. Don’t hesitate to do business with a firm or a good accountant to maximize your tax return and to consult this checklist.
You have until April 30 to file your tax return. So what are you going to do with your tax return?
A refundable tax credit is an amount that will be paid to you even if you have no taxes to pay.
A non-refundable tax credit reduces the amount of tax you pay on your taxable income. It does not give you a refund, but you can use it to offset the amount you owe.