Tax credits and deductions 101
There’s a lot to understand when it comes to taxes, such as figuring out what a Notice of Assessment (NOA) is or how to file taxes when you’re new to Canada. But perhaps one of the most important tax questions to wrap your head around is credits and deductions. Is there a limit to how many you claim? Good news, there isn’t!
While tax credits and deductions can get confusing, they don’t have to be. We’re here to guide you through these tax concepts so you can focus on things that really matter.
Credits versus deductions.
Although often interchanged, tax credits and deductions are two different tax-related terms and they affect your bottom line differently.
Credits, on the other hand, decrease the amount of tax you’ll have to pay on your taxable income. These can be further divided into non-refundable and refundable. Non-refundable credits are those that reduce the amount of taxes you’d pay but don’t give you a refund if your taxes payable are already zero. Refundable credits, though, is money you can get from the CRA even when you have no income tax payable.
What can you claim?
Remember, as long as you qualify, there is no limit to how many you claim. So, to make sure you get what’s yours, check which credits or deductions you’re eligible for.
Generally, tax credits and deductions can be split into a few categories. The most common include:
What the CRA deems a red flag.
While there isn’t a limit to how many tax credits and deductions you can claim, we do want to give you a heads up on one thing: consistency.
If after reading this, you report deductions or credits that are inconsistent with past filings, this could prompt the taxman to ask questions because you haven’t claimed them before. To keep yourself safe and protected against any inquiries, make sure to keep any documents to help back up your claims. That means you really shouldn’t throw out those donation or medical receipts – they can save you in the long run!
While this was just the tip of the tax credit and deduction iceberg, figuring out which ones you qualify for and what you need to prove it can be a bit confusing. Find a local H&R Block location and speak to a Tax Expert to get the most of your taxes this season. Or if you’re a pro already, file yourself with the H&R Block Tax Software.