The information provided below is general in nature and may not apply to all individuals. Please contact us for personalized advice.
Tax Tips – General
The information provided below is general in nature and may not apply to all individuals or businesses. Please contact us for personalized advice suitable to your unique situations.
Key Tax Considerations – General
- Individual Tax Return Deadlines: Individual Income Returns are due by April 30. For self-employed individuals, the filing deadline is extended to June 15; however, any balance owing must still be paid by April 30. You may consider filing your return on time to avoid penalties, even if you are unable to pay the balance due.
- RRSP Contributions Deadline and Limits: You can contribute to your RRSP at any point during the year and/or during the first 60 days of the following year. Contributions you make in January and February can be deducted from your previous year’s income.
Your maximum contribution limit (“RRSP Contribution Room”) is stated on your notice of assessment. The over-contribution of RRSP may attract a penalty of 1% tax per month as well as come tax reporting compliance.
For more information, refer to https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/contributing-a-rrsp-prpp.html
- Tax Free Savings Account (TFSA): Any individual that is a resident of Canada who has a valid SIN and who is 18 years of age or older is eligible to open a TFSA.
Any individual that is a non-resident of Canada who has a valid SIN and who is 18 years of age or older is also eligible to open a TFSA. However, any contributions made while a non-resident will be subject to a 1% tax for each month the contribution stays in the account.
Contributions to a TFSA are not deductible for income tax purposes. Any amount contributed as well as any income earned in the account (for example, investment income and capital gains) is generally tax-free, even when it is withdrawn.
For more information, refer to https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4466/tax-free-savings-account-tfsa-guide-individuals.html#P44_1110
- Tax Payments to CRA: The CRA accepts many payment methods. Find out which way to pay works best for you. Please ensure to apply to correct SIN/BN# as well as correct tax period.
For more information, refer to https://www.canada.ca/en/revenue-agency/services/payments/payments-cra/individual-payments/make-payment.html
- Charitable Donations: If you or your spouse or common-law partner made a gift of money or other property to certain institutions, you may be able to claim federal and provincial or territorial non-refundable tax credits when you file your income tax and benefit return. Generally, you can claim part or all of the eligible amount of your gifts, up to the limit of 75% of your net income for the year.
If you require information about a gift made in a previous year, you will need the version of Guide P113, Gifts and Income Tax, for the year in which you made your gift.
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- Medical Expenses: Medical expenses can be claimed for any 12-month period ending in the taxation year. Lumping larger costs together may maximize your claim.
- GST/HST Credit: File an income tax return to be eligible for the HST credit.
- Capital Expenditures for Self-Employed: Consider making capital expenditures, such as purchasing equipment or vehicles, before December 31. Please consult us for advice tailored to your situation.
- Interest on Loans: Interest on loans used for investing in an RRSP is not tax-deductible. However, borrowing to maximize contributions may still be beneficial. Consult a professional to evaluate your specific circumstances.
Tax Tips – For Employees
Key Tax Considerations For Employees
- RRSP – Consider contributing to RRSP for the tax year to avail the tax deferral through RRSP deduction in the current year
- Expenses related to employment:
Expenses incurred to earn employment income may be deductible, including GST/HST paid on them. This can be deductible to the extent the expense to be incurred by the employee as per the requirement of the employment and is required by the employer.
The following are some ex
- Employee Motor Vehicle Travel Expenses
- Employee Meals and Lodging expenses
- Employee clothing & footwear
- Employee Tools Deduction
- Tools deduction for employed Tradespersons
- Tools deduction for eligible apprentice mechanic
- Gain on disposal of employee tools
- Moving Expenses Deduction
- Job-Related Courses: Ask your employer to pay for job-related courses directly. If you pay for post-secondary courses related to your current job, you may claim the Education Tax Credit.
- Home Office Expenses: If you work from home, arrange employment terms to deduct home office expenses. Your employer must sign Form T2200 to verify this requirement.
- Deductible Expenses for Commission Employees: If you earn commission income, consider leasing instead of purchasing tools like cellphones or computers, as capital cost allowances are not claimable on these items.
- Company Car: Reduce the operating cost and/or standby charge benefits of a company car by:
- Reimbursing your employer for some or all operating costs, or for 100% of the personal-use portion.
- Minimizing personal driving.
- Reducing the number of days the car is available to you.
- Asking your employer to sell and lease back the car.
- Keeping records of personal and business kilometers.
- Compensation Packages: When negotiating your compensation, consider to include tax deferred compensation options as well as non-taxable employee benefits as part of your compensation.
- Retirement Allowance: Transfer retiring allowances directly to an RRSP (up to the deductible amount) to avoid withholding tax.
Tradespeople’s Tools: Deduct up to $500 for tools—note that cellphones and computers do not qualify for this deduction.
Tax Tips – For Business Owners
Key Tax Considerations for Business Owners
Timely Tax Payments
- Adhere to monthly or quarterly advance tax installment schedules as mandated by the Canada Revenue Agency (CRA) to avoid interest penalties.
- Settle final corporate income and capital tax balances within the prescribed timeframe: two months post-year-end for most businesses, or three months for eligible Canadian-Controlled Private Corporations (CCPCs).
Strategic Income Distribution
- Optimize the balance between salary and dividends for yourself and family members to minimize overall tax liability.
- Consider retaining income within the corporation if personal tax rates exceed corporate rates, allowing for tax deferral opportunities.
Compensation and Benefits Planning
- Accrue salaries and bonuses before your fiscal year-end, ensuring payment within 180 days of the corporation’s year-end.
- Design employee gift and award programs in alignment with the CRA’s latest guidelines to maximize tax efficiency.
Capital Investment and Asset Management
- Evaluate the potential benefits of accelerating depreciable asset purchases under certain conditions to optimize tax deductions.
- For 2025, leverage the Lifetime Capital Gains Exemption, which has likely increased from the 2017 amount of $848,252. Ensure your company qualifies as a small business corporation and consider strategies to maximize this exemption among family members.
Corporate Loan Considerations
- Utilize shareholder loans to the corporation strategically, potentially reducing active business income to the small business deduction threshold.
- Repay any loans from the corporation within one tax year of borrowing to avoid adverse tax consequences, barring specific exceptions.
Business Structure and Professional Practices
- For professionals and sole proprietors, evaluate the benefits of maintaining an off-calendar year-end and consider incorporation if it offers commercial and tax advantages.
- Be aware that most government and court-imposed fines are not tax-deductible expenses.
Additional Considerations
- Review and update your tax strategy regularly to account for changes in tax laws and your business circumstances.
- Consult with a qualified tax professional to ensure your tax planning aligns with the most current regulations and maximizes available benefits.
Remember, tax laws and thresholds are subject to change. Always verify current limits and regulations with the CRA or a tax professional when implementing these strategies.
Tax Tips – For Students
- Scholarships and other prizes: Remember that all scholarship fellowship bursary or prize from a program that entitles the student to the education tax credits is tax-free.
- Moving expenses: If you moved to attend school, your moving expenses may be deductible.
- Education tax credit: Claim this credit if you are in a full or part-time student of if you pay for post-secondary education that is related to your current employment (and not reimbursed by your employer).
- Textbook tax credit (up to 2016 only): Claim this credit which is to offset the cost of textbooks. The credit is $65 per month for full-time students and $20 per month for part-time students.
- Unclaimed credits: Remember that the carry forward period is indefinite for unclaimed education and tuition fees credits; and five years for unclaimed student loan interest.
- Foreign university tuition fees: If you attend a foreign university, your tuition fees may be eligible for a tuition credit in Canada.