What Can Be Shown as Expenses in Personal Tax Returns in Canada
At Bookkeeping Bizz Inc., we understand the importance of maximizing your tax benefits. When filing your personal tax return in Canada, various deductions, credits, and expenses can reduce the amount of tax you owe. Here’s an in-depth look at some common expenses you can claim:
1. Medical Expenses
You can claim a wide range of medical expenses for yourself, your spouse or common-law partner, and your dependents. Eligible expenses include:
- Prescription drugs and medications prescribed by a doctor.
- Dental services, including cleanings, fillings, and orthodontics.
- Medical devices and equipment, such as hearing aids, wheelchairs, and crutches.
- Services from medical practitioners, including physiotherapists, chiropractors, and psychologists.
- Travel expenses if you had to travel at least 40 kilometers to obtain medical services not available in your locality.
Keep all receipts and ensure you only claim the portion not reimbursed by insurance. Use Form T1-M, Medical and Disability-Related Expenses, to claim your medical expenses.
2. Child Care Expenses
If you paid for child care services to allow you or your spouse to work, study, or conduct research, you can claim these expenses. Eligible expenses include:
- Fees paid to daycare centers, nurseries, and caregivers.
- Costs for boarding schools, overnight camps, or sports schools.
- Fees for after-school programs or summer camps.
The expenses must be for children under 16 years old, or for children with disabilities who are 16 years old or older. Use Form T778, Child Care Expenses Deduction, to claim these expenses.
3. Moving Expenses
If you moved at least 40 kilometers closer to your new work location or school, you can claim moving expenses. Eligible expenses include:
- Transportation and storage costs for your household items.
- Travel expenses, including vehicle expenses, meals, and accommodation.
- Costs for temporary living expenses for up to 15 days.
- Real estate commissions and legal fees if you sold your old home.
- Costs of cancelling the lease for your old residence.
Use Form T1-M, Moving Expenses Deduction, to claim your moving expenses.
4. Employment Expenses
Certain employment expenses can be claimed if they are necessary for earning your employment income. These include:
- Home office expenses if you use a portion of your home exclusively for work and your employer requires you to work from home.
- Supplies such as stationery, postage, and computer consumables.
- Tools and equipment if required by your job, such as mechanics’ tools or hairdressers’ equipment.
You must have a signed Form T2200, Declaration of Conditions of Employment, from your employer to claim these expenses.
5. Pension Plan Contributions
Contributions to a Registered Pension Plan (RPP) or a Registered Retirement Savings Plan (RRSP) can be deducted from your taxable income. Contributions to RRSPs are particularly beneficial as they grow tax-deferred until retirement. Official tax slips (such as T4, T4A, or RRSP contribution receipts) are needed to claim these deductions.
6. Union and Professional Fees
You can claim annual union, professional, or like dues if they are necessary to maintain your professional status or membership in a trade union. This includes:
- Professional association fees.
- Union dues.
- Paralegal association fees.
Ensure you have receipts or proof of payment for these fees.
7. Disability-Related Expenses
If you or a dependent have a disability, you can claim expenses related to the disability, such as:
- Attendant care expenses.
- Home renovations to improve accessibility.
- Devices and equipment that facilitate daily living.
You may need to provide additional documentation, such as Form T2201, Disability Tax Credit Certificate, to claim these expenses.
8. Other Deductions
Other deductions you can claim include:
- Support Payments: If you make spousal or child support payments, you can claim these as deductions.
- Carrying Charges and Interest Expenses: Deduct interest paid on loans used to earn investment income.
- Moving Expenses: Deduct costs associated with moving for work or study if the move is at least 40 kilometers closer to the new location.
- Clergy Residence Deduction: If you are a member of the clergy or a religious order, you may claim this deduction.
New Additions and Changes for 2024
The tax landscape is constantly evolving, and it’s essential to stay updated on the latest changes. Here are some key updates for 2024:
- Higher Basic Personal Amount: The Basic Personal Amount (BPA) has been increased, allowing you to earn more income before paying federal tax.
- New Federal Tax Brackets: Adjustments to the federal tax brackets may affect the amount of tax you owe.
- End of Flat-Rate Method for Home Office Expenses: The flat-rate method for claiming home office expenses has been eliminated. You’ll now need to use the detailed method, which requires more documentation.
- Advance Canada Workers Benefit Payments: Taxpayers no longer have to apply for advance payments of the Canada Workers Benefit (CWB) when they file their tax returns.
Contributions to a First Home Savings Account (FHSA)
A First Home Savings Account (FHSA) is a registered plan that allows first-time home buyers to save for a qualifying first home tax-free, up to certain limits1. Contributions made to your FHSA are deductible on your income tax return for the year of the contribution or a future year, similar to RRSP contributions2. For 2024, the contribution limit is $8,000.
Important Tips
- Keep Your Receipts: Always keep receipts and supporting documentation for all expenses you claim. The CRA may request proof of these expenses.
- Check Eligibility: Ensure the expenses you claim are eligible under CRA guidelines.
- Consult a Professional: If you’re unsure about any deductions or credits, consider consulting with one of our tax professionals for advice.
By understanding and claiming these expenses, you can reduce your taxable income and potentially lower your tax bill. If you have any questions or need further assistance, consult one of our tax professionals.
