There are many things that you can do to reduce your tax liability. These tax tips help you avoid common mistakes that could cost you thousands of dollars. First up is claiming your ‘Home Office Expenses’. For those of you, who worked from home last year because of Covid'19, you are eligible to claim your home office expenses on your taxes. There are two different ways that you can do this which are as follows:
- Temporary Flat Rate Method
The temporary flat rate method of claiming your home office expenses is the simplest way to claim as it doesn’t require you to submit any documentary evidence for your home office expenses. The maximum benefit that you can get is $400 without any proof of home office expenses.
- Detailed Method
Under the detailed method, employees can claim a higher amount of home office expenses. Employees who use the detailed method need to maintain documentation to support their home office expense claim and have a signed copy of either Form T2200S or T2200 at the time they make their claim.
Investments in RRSPs & TFSAs
If you invest in RRSPs and TFSAs, it will not only save you a lot of money for your retirement but also lower your tax liability. If you maximize your RRSP contributions, you will reduce your yearly income and this will save you in your tax bill.
Moving Expenses
You can claim moving expenses if you moved at least 40km to be closer to a new job. You may deduct the cost of moving expenses incurred by completing the Form T1-M, i.e., Moving Expenses Deduction.
Medical Expenses
Many Canadians don’t know that they can claim some of their medical expenses to reduce their tax bill. Depending on how much you spend a year on healthcare costs, you could be eligible for some tax credits. If you want the credit, it’s vital to have proof of any medical expenses so make sure you keep your receipts.
Hire a Professional
If you only have employment income, it would be easy for your to prepare and file your taxes yourself. If you have income from different sources, you will have to do different tax treatments and you need to hire a professional at the time of filing your tax return so you don’t miss any credits. Taxes aren’t simple and you can easily miss some of the important things if you don’t rely on a professional.
Professional Software
Even if you do your taxes yourself, you need to make sure that you don’t miss deductions or allowances which are easy to miss when you do taxes on your own. If you don’t want to spend money on an accountant, consider looking into top-grade software to assist you in filing your taxes correctly. The right software can help you find lots of ways to pay less taxes.
These are some of the tips that can reduce your tax liability. If you have more than one income source, we would recommend you to reach out to us at GTA Accounting. We will analyze you’re your file in detail and prepare your tax return as per the CRA rules and regulations.