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These tips will help reduce the stress of filing your tax return.
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.
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:
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.
