Don’t leave your eligible tax credits off your tax return

As printed on SaltWire.com, March 24, 2022

Contributed by Chris Ball, Senior Financial Planner, CFP®, CIM ®, FCSI®, Assante Capital Management Ltd.

As we approach another tax season, we turn our attention to some of the tax credits Canadians can deduct on their personal income tax returns.

When we are collaborating with our clients and get a full understanding of their financial situation, we often come across numerous situations where a client has not claimed a tax credit for which they were eligible.

These tax credits can be claimed in a number of areas, and are often overlooked. In many cases, this is because these clients have not worked with a financial advisor or tax professional in the past.

Carrying charges

Carry charges are one of the most often overlooked deductions because the name is unclear. Carrying charges include some of your investment advisor’s fee incurred on non-registered investments, or loan interest on money borrowed for non-registered investments earning investment income. These carrying charges are a direct deduction from your taxable income.

Medical expenses

Often, medical expenses are not claimed because individuals don’t feel it’s worthwhile. It’s not that Canadians aren’t claiming any medical expenses, but rather that there are many missed medical expenses that do qualify. These include things like amounts paid for gluten-free food if it is recommended by a doctor.

In addition, what the Canada Revenue Agency (CRA) describes as “medical expenses for self” includes medical expenses paid for you, your partner, and your minor children.

Disability tax credit

The disability tax credit is one of the most valuable, worth about $1,500 for adults and even more for a child. If you don’t use the full value of the credit because your income is lower, you can transfer the unused credit to a wide range of people.

One reason this credit is often overlooked is that it covers a broad range of physical and mental impairments, many of which are not associated with a disability. These include ADHD, autism, and diabetes. The other reason is that you must apply to the CRA for the tax credit, and the necessary form (T2201) must be completed by both the applicant and their medical practitioner.

Home buyer’s amount

If you purchased a home this year and you have not lived in a home owned by you or your partner in any of the four preceding years (or you have purchased a home and have been approved by CRA to claim the disability tax credit), you might be eligible for a $5,000 tax credit.

This can be worth up to $750, and if you qualify for this amount, claiming this credit is as simple as ticking a box on your tax return.

Student loan interest

Interest paid on a student loan is often an overlooked credit. This non-refundable credit applies to interest paid on eligible loans, which would include federal and/or private student loans like grad school loans (Grad PLUS loan), and parent loans, like the Parent PLUS loan. If you opened a student line of credit to fund your studies, that interest is not tax-deductible.

Student loan interest can be carried forward for up to five years, so if you do not need the deduction this year, carry it forward.

Charitable and political donations

Small donations to eligible charities can add up over the year. If you claim charitable donations, you can receive a 15 per cent credit on the first $200 of contributions, and 29 per cent on donations more than $200. The maximum amount of donations is 75 per cent of your income in that year. You will also receive a deduction for contributions to federal and provincial political parties and candidates.

In addition to donating cash, you can donate publicly traded securities or life insurance policies. Donating securities is advisable for those investments with significant gains because these gains are exempt from capital gains tax. These often-unclaimed credits can add up significantly over a year and help reduce your tax bill. As always, we recommend you consult your Assante advisor or a tax-planning professional to see which credits you may qualify for.

This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see a professional advisor for individual financial advice based on your personal circumstances. Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada.