Personal income deductions and tax credits

personal income tax
  • by admin
  • February 15, 2021

Do you know what are tax deductions or tax credits that you can claim on your tax return? A quick look at this list before filing your taxes will help you minimize your taxes payable. If you know what you could claim at least you will be able to ask a question to your tax professional.

 

As a resident of Canada and in some cases, a non-resident will need to file a tax return every year. Generally, this return is called “T1 General Personal Information and Benefit return”. This form changes every year, and you have to select this form published by CRA for that particular year. A non-resident or a foreign person may have to file a different type of form.

We have tried to categorize this form into the following major sections and prepare a checklist for each section, which we think should be glanced at before working on the return. From this checklist, you may check the items that may apply to you and then look into further details and scenarios that may be applicable to you.

Major sections of T1

  1. Total income from all major sources
  2. Major deductions from income
  3. Federal non-refundable tax credits
  4. Refundable tax credits, incentives, and taxes paid.

 

Generally, you report the following primary income sources that are taxable on your T1 personal income tax and benefits return. The total of these sources is reported as “Total Income.”

Total income from all major sources

  1. Employment income
  2. Other employment
  3. Old Age Security payments
  4. CPP or QPP benefits
  5. Pensions & superannuation
  6. Elected split-pension
  7. Universal child care benefits
  8. Employment insurance benefits
  9. CERB and CRB benefits
  10. Taxable dividends
  11. Investment income
  12. Partnership income or loss
  13. Registered Disability Saving Plan
  14. Rental income or loss
  15. Taxable capital gains
  16. Support payments received
  17. RRSP withdrawal
  18. Taxable scholarship and grants
  19. Self-employment income or loss
  20. Other payments & benefits

 

You may be entitled to claim certain deductions from the total income reported above. Your above total income less these deductions is your “Net Income.”

Generally, the following major Deductions that you can claim.

  1. Contribution to Registered Pension Plan
  2. Contribution to Registered Retirement Saving Plan
  3. Elected split-pension
  4. Union or professional dues
  5. Universal child care benefit
  6. Childcare expenses
  7. Disability supports
  8. Allowable Business Investment Loss
  9. Moving expenses
  10. Support payments
  11. Carrying charges & interest paid.
  12. CPP or QPP
  13. CPP or QPP Enhanced
  14. Provincial Parental Insurance Plan
  15. Exploration and development expenses
  16. Other employment
  17. Clergy residence
  18. Social benefits repayment
  19. Others

In addition to the above deductions, you may also be entitled to claim few more deductions. Your taxable income is determined as your “Net Income” from above minus the following deductions.

Major other deductions that may apply to you.

  1. Canadian Forces & police deductions
  2. Security options deductions
  3. Other payment deductions related to WCB or SAP
  4. Limited partnership losses
  5. Non-capital losses carried forward from prior years.
  6. Net capital losses carried forward from prior years.
  7. Capital gains deduction on the disposition of certain properties
  8. Northern residency deductions
  9. Additional deductions, for example, exempt foreign income.

 

Once you arrive at your taxable income for the year, you need to work out your total taxes payable, including your federal and provincial taxes payable. You may be entitled to certain non-refundable federal tax credits from these taxes payable that you can deduct from your total federal taxes owed.

Non-refundable tax credits

  1. The basic personal amount that applies to every individual based on your days resident in Canada
  2. Age amount that applies to every individual based on your age
  3. Spouse or common-law partner if this individual has some balance left from the basic personal amount
  4. Caregiver amounts for a spouse or elderly dependents
  5. Eligible dependant amounts
  6. Caregiver amounts for 18+ ages
  7. Canada caregiver amount for children
  8. CPP/QPP paid on employment income
  9. CPP/QPP paid on self-employ and other income
  10. Employment Insurance paid on employment income.
  11. Employment Insurance paid on self-employment income or other.
  12. Provincial Parental Insurance Plan premiums
  13. Provincial Parental Insurance Plan premiums on employment
  14. Provincial Parental Insurance Plan premiums on self-employment
  15. Volunteer firefighters’ amount
  16. Volunteer search & rescue amount
  17. Canada Employment amount
  18. Home accessibility expenses
  19. First-time Homebuyers amount
  20. Eligible Adoption expenses
  21. Digital news subscription tax credit
  22. Pension income amount
  23. Disability claim for self
  24. Disability claim for a dependent
  25. Student loan interest paid.
  26. Eligible Tuition fees paid in Canada or a foreign country
  27. Tuition amount transfer from child
  28. Certain credits not fully claimed by your spouse/partner
  29. ON Low-Income Workers Tax Credit – ON428-A
  30. Net medical expenses
  31. Charitable donations and gifts

 

There are specific federal and provincial tax credits that you can directly deduct from your taxes payable to certain limits.

  1. Dividend tax credit
  2. Foreign tax credit

In addition to the above credits, you may also be entitled to claim the following refundable credits, taxes paid or deducted, and incentives from your total taxes payable.

Refundable tax credits, incentives, and taxes paid.

  1. Income tax deducted from your employment income
  2. Income taxes paid by installments
  3. Tax transfer amount to QC resident
  4. Refundable QC abatement
  5. Fed refundable First Nations abatement
  6. CPP overpayment
  7. EI overpayment
  8. Climate action incentive
  9. Refundable medical expense supplement
  10. Canada Working Benefit
  11. Canada training credit
  12. ON Jab Training Credit
  13. Investment tax credit
  14. Part XII.2 trust tax credit
  15. GST/HST rebate
  16. Educator school supply tax credit
  17. Canadian journalism labor credit
  18. ON Childcare access and relief from expenses (CARE) tax credit – ON479
  19. ON Vacation Tax Credit for 2022

 

After deducting the above items, you arrive at your net income taxes payable. You need to pay your taxes owing on or before April 30th. Your tax return filing deadline usually by April 30th of the following year unless you or your spouse reports business or professional income. If you or your spouse reports income from a business or profession, your tax return filing deadline is Jun 15th. However, in both scenarios, you need to pay your taxes owing by April 30th.

You report your net income from your business or profession as under the above total income sections. The business or your professional expenses and deductions you may be entitled to claim from your gross business or professional income have not been outlined above. You may please refer to our blog “Business Expense” for those expenses and deductions.

You can pay your taxes owing from your online banking platform. For further details, please visit our other blog, “CRA Payment.”

You can file your tax return electronically, or you can mail printed copies to your CRA tax center. When you file your tax return electronically, it gets processed faster. We provide electronic tax filing services for all types of personal tax returns.

The items have been described in a summary form and include major items that are generally applicable in most personal taxes. You may need to contact your accountant for a comprehensive analysis of your tax situation.

 

Disclaimer: Information in the blog/post/article has been presented for a broad and simple understanding. This is not legal advice. RKB Accounting & Tax Services does not accept any liability for its application in any real situations. You need to contact your accountant or us for further information.

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