Common Tax Deductions and Tax Credits for 2021 T1 Individual Tax Returns

Canada is in tax season again, and you are probably worried about filing your 2021 T1 personal taxes and filings.

Fix My Books has listed out some of most common deductions and credits that people miss when filing.

Alone, these deductions and credits may not add up to much, but if you have several they can make a big difference to your year end tax bill.

Can I claim Moving Expenses?

You may be able to deduct some of your moving expenses for yourself, your family, and your belongings if you moved closer to your work or school in 2021. However, to qualify to have moving expenses deducted, the new home must be at least 40 kilometers closer to the new work or school location.

Some things you can claim:

• transportation and storage costs;

• travel expenses, such as vehicle expenses, meals and accommodation;

• temporary living expenses;

• cost off cancelling a lease;

• cost of changing your address on legal documents;

• cost of replacing a drivers license;

• utility hook-ups and disconnection costs;

• costs related to maintaining the old home when vacant, as well as selling the old home and buying a new home

Some things you cannot claim:

• expenses for work done to make your old home more saleable;

• losses from the sale of your home;

• travel expenses for house-hunting trips;

• travel expenses for job-hunting trips;

• expenses to clean or repair the rented home to meet landlord standards;

• expenses for replacing personal-use items;

• mail-forwarding costs;

• costs incurred in the sale of your old home if you delayed selling for investment purposes or until the real estate market improved;

• mortgage default insurance

Medical Expenses? Can I claim them?

You are able to claim medical expenses to provide yourself with a credit, but they will need to exceed a qualifying threshold. The threshold is the lesser of 3% of your net income and $2,421 (for 2021).

To get the largest credit possible on the families overall taxes, you can claim eligible medical expenses for yourself, spouse and young children on the return of the individual with the smallest net income.

However, if these expenses were reimbursed to you, or covered by a health plan, they will not be able to be claimed.

Donations & Political Contributions Tax Credits

Donations to Canadian registered charities do provide you with a federal tax credit.

• On the first $200, you can receive a 15% tax credit;

• On the remaining amount, you can receive a 29% tax credit;

• The credit can be shared between yourself and your spouse;

• The credit is maxed out at 75% of net income (excluding Quebec); and

• You can carry forward unused credits for up to 5 years.

Political Contributions to Canadian Political Parties can also provide you with 50% relief on the contributions made in the year. This maximum varies for provincial contributions and is maxed out at $1,275 for federal contributions.

Professional Dues

A tax deduction can also be claimed for professional dues and memberships paid to professional organizations.

If you are a medical professional, in your annual membership fees, as well as the cost of malpractice insurance is also a tax-deductible expense.

Carrying Charges & Interest paid to earn Investment Income

Carrying charges, such as fees related to financing and investments are a tax deduction.

Some examples are fees paid for investment advice and fees paid to a financial advisor to manage specific investments.

However, account fees related to your RRSP and TFSA are not deductible.

Additionally, if you borrowed money to invest in non-registered accounts (RRSP, TFSA, etc.) this interest paid is a tax deduction against the investment income earned.

Home Buyer’s Amount has a Tax Credit?

If you purchased a home in 2021 and have not lived in a home owned by you or your partner in the last four years, you may be eligible to claim this tax credit worth up to $750 in tax savings.

Student Loan Interest is a Tax Credit

If you have a provincial and / or federal student loan, a tax credit for the interest paid is an allowable. This can be carried forward onto future tax returns for up to 5 years, if not used in the year paid.

However, if the loan is from a private financial institution, the interest paid on the loan is not eligible for the credit.

Childcare Expenses

Childcare expenses are considered tax deductible if your child attends a facility so that you can go to work or school, or run a business.

These expenses are usually claimed by the spouse with the lowest income (though this is not always the case).

Other fees are also eligible, such as:

• Day camps and sports schools where the primary role of the camp/school is to provide childcare

• Overnight sports schools, boarding schools and camps where accommodation and lodging is involved

Disability Tax Credits

The disability tax credit (DTC) is a non-refundable tax credit that helps persons with disabilities or their supporting persons reduce the amount of income tax they may have to pay. An individual may claim the disability amount once they are eligible for the DTC. This amount includes a supplement for persons under 18 years of age at the end of the year.

This tax credit can result in tax savings of up to $1,500 for adults, with potentially more for a minor.

An individual may be eligible for the credit only if the CRA approves a T2201 Disability Tax Credit Certificate which is completed and certified by a medical practitioner.

If you need further help or assistance. Always feel free to contact Fix My Books as we are here to help!