Tips to reduce your tax bill

As the saying goes, “there’s no time like the present.” With a bit of planning and organization, you can boost your after-tax cashflow. Preparing ahead of time can go a long way to reducing your stress ahead of that dreaded annual deadline to file your personal income tax return.

The personal income tax filing deadline is April 30 for most of us. But, if you or your spouse or common-law partner (CLP) are self-employed, the filing deadline is June 15. If either of these dates fall on a weekend, your tax return will be considered to be filed on time – as long as it’s received by the Canada Revenue Agency (CRA) or postmarked on or before the Monday that follows.

Request a reduction in the tax withheld from your pay

If you intend to contribute to your self-directed Registered Retirement Savings Plan (RRSP) in 2024, you can request to have the amount of tax withheld from your pay reduced to reflect those contributions.  Rather than waiting for a tax refund in the spring of 2025, you can effectively receive some of that refund with each paycheque.

Your employer will require a letter from the CRA giving them permission to reduce the tax withheld. To get this letter, fill out Form T1213, Request to Reduce Tax Deductions at Source and send it to the CRA. Expect that it will take six to eight weeks to get a response back. 

It’s important to note that the T1213 form is for a specific year. You will have to make this request annually.

Other reasons to request a reduction in tax withheld may include other significant anticipated expenditures, such as medical expenses, donations and support payments.

You may also consider such a request when you anticipate your annual bonus payment and know that you’re going to contribute a part of it to, for example, your RRSP.

Access available tax deductions and credits

There are many tax deductions and tax credits available to taxpayers. 

Tax deductions reduce the amount of tax you must pay, but the reduction is usually at the lowest rate of tax. Irrespective, they are still worth claiming. 

Canada has a graduated tax rate system. This means that as your income goes up, you pay more tax on each extra dollar that you earn. The amount of tax that you pay is dependent on the tax bracket associated with that extra dollar of income. Tax deductions may help reduce your taxable income to get into a lower tax bracket. 

Tax credits claimed reduce the amount of tax you must pay, but the reduction is usually at the lowest rate of tax. Irrespective, they are still worth claiming. 

With the right documents in hand, you can maximize the deductions and credits to claim. It will save you tax.

To reduce the stress that goes with gathering documents at the last minute when you prepare your annual tax return, some up-front organization and discipline throughout the year can be beneficial.  It’s simple. To start:

• Create a file folder (paper or electronic).
• Save a copy of the receipts for payments you make related to:
  • Charitable donations
    • Qualifying charitable donations made by you and your spouse/CLP can be combined and claimed by either spouse/CLP. This maximizes the potential benefit of this credit. 
  • Medical expenses
    • Medical expenses can be claimed for any 12-month period ending in the taxation year (provided not claimed previously). 
    • They can only be claimed if they exceed a minimum threshold. If a medical expense cannot be claimed in the current year, keep the receipt because you may be able to claim it in the next tax year. As well, you can benefit by planning to have your larger expenses occur in the same 12-month period.
    • Medical expenses incurred by you and your spouse/CLP, as well as your dependents, can be combined and claimed by either spouse/CLP. This maximizes the potential benefit of this credit.
    • If the medical expenses claimed are due to a disability, speak to a qualified tax advisor to learn more about the disability tax credit and other potential expenses to claim.
  • Eligible dependent tax credit
    • If you are separated or divorced and have children that are dependent upon you for support, you may be able to claim the eligible dependent non-refundable tax credit. 
    • Shared custody arrangements allow for one of the parents to claim the credit for a particular child each year, provided other conditions are met. If contemplating such an arrangement, put in writing who will claim amount for eligible dependent credit in advance. CRA may request a copy of your separation agreement to confirm such arrangements. Speak with a qualified family lawyer and tax accountant to learn more.
  • Childcare services
    • Allowable child-care fees include payments for child care services by a caregiver, day nursery school, child care fees paid to an educational institution, day camps and day sport schools where the primary goal of the camp is to care for children, boarding schools, overnight sports schools or camps where lodging is involved.
    • For married or common-law couples, the parent with the lower net income claims the expense.
  • Moving expenses
    • If you have moved to a new home to work or to run a business out of a new location or to study full-time in a post-secondary program, you can deduct eligible moving expenses.
    • To do so, your new home must be at least 40 kilometers closer to your new work location or school.
    • You deduct eligible moving expenses from the income you earned at your new work location.  For a full-time student, the income against which you can deduct these expenses includes scholarships, fellowships, bursaries, certain prizes or research grants received. As well, a student moving for summer employment or to run a business, can also claim moving expenses against the income earned at the new location.
    • Eligible moving expenses include the transportation and storage of household items, travel expenses such as vehicle expenses, meals and accommodation, temporary living expenses (maximum 15 days), lease cancellation costs, certain costs of selling your old home and certain other costs. 
    • If your moving expenses exceed the income earned that year at the new work location or from the post-secondary program, you can carry forward and deduct the unused amount from such income earned in a future year. 
  • Carrying charges, interest expense and other expenses associated with earning investment income
    • You may be able to deduct fees paid to manage your investments and provide investment advice. This deduction is not available for fees associated with your registered accounts, such as your RRSP or Tax-Free Savings Account (TFSA).
    • A deduction may also be available for interest paid on money borrowed to invest. Again, this does not apply to loans taken out to invest within registered accounts.
  • Tuition Fees
    • Tuition fees paid to qualifying educational institutions may be eligible for the tuition tax credit.
  • Home office expenses
    • Certain costs associated with your home office can be claimed on your tax return. Read this article to learn more.

Speak with a qualified tax advisor to learn more about these and other potential tax credits to claim.

RRSP contributions

Make your RRSP contributions early in the year to maximize the potential tax deferred growth within your RRSP.  

Find out how much you can contribute to your RRSP and any unused amount on your Notice of Assessment. You can also get  this information through your on-line account (known as My Account) with Canada Revenue Agency. Provide your Advisor with a copy of your Notice of Assessment.

For contributions made in the first 60 days of 2025, an RRSP contribution slip will be sent to you in March 2025. These contributions can be deducted on your 2024 income tax return. 

You don’t have to deduct the total amount contributed against your 2024 income. Some or all of the amount contributed can be carried forward to a future taxation year. This could benefit you if your marginal tax rate is expected to be higher in a future year. 

If you can’t make your full RRSP contribution at the beginning of the year, consider contributing each pay day. Set up a pre-authorized contribution (PAC) arrangement. It’s a disciplined approach to saving, with an opportunity to take advantage of market variability, commonly referred to as “dollar cost averaging.”

If your employer is willing to match some or all of your RRSP contribution, sign up! This is a great opportunity to enhance your savings, at minimal cost to you.   

Your employer’s retirement savings plan option may be called a Group RRSP or a Defined Contribution Pension Plan. Speak to your employer’s human resource department or an advisor to learn more about these retirement savings options.

Also to consider

Property flipping rules

Any person who sells a property on or after January 1, 2024, that they have owned for less than 12 months will be taxed on 100% of their profit as business income. There are some exceptions, such as the death of the taxpayer, marriage breakdown and disability.

Multigenerational Home Renovation Tax Credit

To help families living together in multigenerational homes, a tax credit of up to $7,500 (or 15% of allowed expenses up to $50,000) can be claimed, related to the construction of a secondary suite for a senior or an adult with a disability.

It’s important to retain valid receipts associated with the costs incurred to build the secondary suite. 

While this summary isn’t exhaustive, it’s a great starting point. So, with a little effort and planning, you, too, can save on taxes.

Information contained in this article is provided for information purposes only. Its not intended to provide or be a substitute for professional, financial, tax, insurance, investment, legal or accounting advice and should not be relied upon in that regard. It also does not constitute a specific offer to buy and/or sell securities. You should always consult your financial advisor or tax specialist before undertaking any of the strategies discussed in this article to ensure that all elements and your personal circumstances are taken into consideration in developing your individual financial plan. Information contained in this article has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made with respect to its timeliness or accuracy and SLGI Asset Management Inc. disclaims any responsibility for any loss that may arise as a result of the use of the strategies discussed.