Let’s face it, we all are going through tough times these days, with the high inflation, high interest rates, and high grocery prices. The one thing you need to make sure you cut is your taxes!
Both federal and provincial governments have announced new or extended some tax savings programs due to COVID. Other deductions may still be applicable to you, and you may not be taking advantage of.
We will list some of those programs below, but first, lets remind you about some deadlines you need to keep in mind.
2022 tax season deadlines
It is important that you file your income tax by the deadline to avoid significant late-filing penalties of 5% of the balance due plus 1% per month to a maximum of 12 months for the first offence, plus interest on the penalty. The interest and penalties are not tax deductible, and the number can add up quickly. It is important to file on time even if you cannot pay the tax amount due.
— The last day to file your 2022 tax return is May 1, 2023
— If you have business income, the deadline is June 15, 2023
— The last day to pay your 2022 taxes is May 1, 2023
— The last day to pay your HST on business income is March 30, 2023
— The last day to contribute to your 2022 RRSP is March1, 2023
Refundable vs Non-Refundable Tax Credits
First you need to understand the difference between the refundable and the non-refundable tax credits.
Refundable tax credits will reduce your tax owing and if the credit is higher than the combined federal and provincial taxes you owe, you’ll receive the difference as a refund.
Non-refundable tax credits can reduce your taxes owing to zero but will not provide a refund even if the total of the credits is higher than your taxes owing.
Ontario Tax Credits
1. Ontario Staycation Credit – Ontario residents can claim 20% of their eligible 2022 accommodation expenses, for example, for a stay at a hotel, cottage, or campground. You can claim eligible expenses of up to $1,000 as an individual or $2,000 if you have a spouse, common-law partner, or eligible children. The credit you get back is up to $200for an individual or $400 as a family.
2. Ontario Senior Care at Home Tax Credit – is a refundable personal income tax credit to help seniors with eligible medical expenses, including expenses that support aging at home. The credit is equal to 25% of your eligible medical expenses up to $6,000, for a maximum credit of $1,500.
3. Seniors’ Home Safety Tax Credit – A temporary, refundable personal income tax credit that can help you make your home safer and more accessible, helping you stay in your home longer.
The credit is available for the 2021 and 2022 taxy ears and is worth 25% of up to $10,000 in eligible expenses per year for the senior’s principal residence in Ontario. The maximum credit is $2,500 per year.
4. Ontario Jobs Training Tax Credit – A temporary, refundable personal income tax credit that helps workers get training that may be needed for a career shift, re-training, or to sharpen your skills. The credit if for up to 50% of eligible training expenses for the year to a maximum credit of $2,000.
Federal Tax Credits
5. RRSP – A Registered Retirement Savings Plan or RRSP is the single most important plan for individuals to reduce their taxable income and save for their retirement. An RRSP is a tax deferral and savings plan. Money invested into your RRSP will be deducted from your taxable income, thus reduce your taxes. Taxes are paid when funds are withdrawn from the account. Investments in the RRSP will grow tax free until they are withdrawn.
Every year and until you reach 71 years of age, you can contribute up to 18% of your earned income up to a maximum of $29,210 for 2022 and $30,780 for 2023.
The deadline to contribute for 2022 is March 1, 2023.
6. Employment Expenses – Eligible employees could claim certain home office expenses if your employment required you to work from home due to COVID or if you worked at least 50% of the time and your employer did not compensate you for the eligible expenses. Amounts claimed must be supported by documents and you have completed and signed formT2200S or T2200 from your employer.
7. Work-from-home Expenses – Are fundable personal income tax credit if you worked more than 50% of the time from home for a period of at least four consecutive weeks in the year. You can claim $2 for each day for a maximum claim of $500 per individual.
8. Moving Expenses – You can claim moving expenses in the year if both of the following apply:
- You moved to work, run a business, or to study as a full-time student enrolled in a post-secondary program
- Your new home must be at least 40 kilometers closer to your new work of school location
9. Charitable Donations – Charitable donations made by you or your spouse during the year. Donations are non-refundable tax credit; any unused portion can be rolled over for 5 years. The federal charitable tax credit rate is 15% on the first $200 and 29% for amounts over $200
10. Political Contribution – There are separate tax credits for federal and provincial or territorial political contributions. There is a federal tax credit for federal political contributions, and there is a provincial/territorial tax credit for provincial/territorial political contributions. All of the tax credits are non-refundable tax credits, except for Ontario, which provides are fundable tax credit for provincial/territorial political contributions. The contributions are claimed in the tax year in which they are paid. If a contribution cannot be fully claimed in the tax year, it cannot be carried forward.
11. Medical Expenses – You can claim eligible medical expense on your tax return if you or you spouse paid for medical expenses in any 12-month period ending in 2022 and you did not claim them in 2021. Examples of medical expenses include prescription drugs, dental, ambulance service, attendant care, prescription eyeglasses, and physiotherapy.
12. Attendant Care and 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.
13. Student Loan Interest – A non-refundable personal income tax credit on the interest paid on student loans obtained under the Canada Student Loans Act, or similar provincial or territorial government legislation for post-secondary education can be claimed as a tax credit. Unused amount can be carried-forward for up to five years.
14. Canada Training Credit – A refundable tax credit that may be used for eligible tuition and fees paid for courses taken in2020 and subsequent tax years. Taxpayers can accumulate $250 of credit room per year, unused tax credit will accumulate for a lifetime maximum of $5,000.
15. Home Accessibility Tax Credit – Available for seniors and taxpayers who qualify for the disability tax credit. The credit provides you with a 15% non-refundable tax credit on up to $10,000 of expenses incurred to perform a qualifying renovation on your home. As of 2022 and for subsequent years, the annual expenses limit has increased to $20,000, which would provide a tax credit of up to $3,000.
16. Digital News Subscription Tax Credit – For the years 2020 to 2024, taxpayers can claim a 15% non-refundable tax credit on amounts up to $500 spent on digital news subscription with a qualified Canadian journalism organization. This credit is available for digital subscription only.
17. Home Buyers’ Amount – For the 2022 and subsequent taxation years, the Federal Budget proposes to increase the amount used to calculate the HBTC to$10,000, which would provide a tax credit of up to $1,500 to eligible home buyers.
18. Teacher and Early Childhood Educator School Supply Tax Credit – A refundable tax credit that Teachers and Early Childhood Educators may claim if they have out of pocket expenses for teaching supplies. Educators can claim up to $1,000 in eligible supplies they have purchased, which would result in up to $150 refund on their tax return.
19. Canada Workers Benefit (CWB) – A refundable tax credit to help individuals and families who are working and earning low income. The maximum basic amount is:
- $1,395 for single individuals with adjusted net income of no more than $22,944
- $2,403 for families with adjusted family net income is no more than $26,177.
20. Climate Action Incentive – A refundable tax credit payable on a quarterly basis starting in July 2022. Even though individuals will no longer receive CAI payment through their tax returns, they still need to file a return to receive the quarterly payments. The CAI quarterly payment for 2023-24 will be $122 per quarter for a single person, $183 for a couple, and for a family of four the quarterly payment will be $244.
Please note that the above information is intended as a general source of information and should not be considered as specific source of tax, legal or financial advice. Tax rules and regulations are subject to change at any time, and we at MMS Accounting will help you navigate and fully benefit from any tax savings available to you.
If you are looking for help with filing your tax return, MMS Accounting provides personalized support, and our team will help you maximize tax-planning opportunities and ensure you are paying the minimum amount of tax required bylaw.