Don’t be surprised! It may feel early in the year, but tax season is just around the corner. You may be wondering, how can I keep more of my hard-earned money in my pocket, instead of the government’s?
There are many ways to reduce your taxes, there are several tax credits available to Canadians. Take into consideration some of the following options:
Registered Retirement Savings Plan
RRSP contributions can help to reduce your taxes owing. Make sure you have enough contribution room in order to avoid over contribution tax! Your available RRSP contribution room can be found on your Notice of Assessment. You can contribute to an RRSP until the end of the year you turn 71. The deadline to contribute for the 2023 tax year is February 29, 2024.
Spousal Registered Retirement Savings Plan
You can contribute to your spouse’s or common-law partner’s spousal RRSP; however, this means you must have available contribution room for this deposit as well! You can contribute to your spouse’s plan until the end of the year when they turn 71. Another important thing to keep in mind with spousal RRSPs is the 3-year attribution rule – meaning if a withdrawal is done from this account within that calendar year plus the following 2 years of the deposit, the withdrawal amount is attributed back to the contributor’s taxable income. Similar to the RRSP, the deadline to contribute for the 2023 tax year is February 29, 2024.
First Home Savings Accounts
The Federal Government started a new program in 2023, the First Home Savings Account. This program is designed to help individuals save for their first home. The contribution limit for 2023 is $8,000, and qualifying contributions are tax deductible, if they were made by December 31, 2023.
Cash donations made to an eligible charity can be claimed on your income tax. Typically, up to 75% of your net income can be claimed. There is a 15% credit for total donations up to $200; a 29% credit for total donations over $200 (that are ineligible for the 33% credit); and a 33% credit for total donations over $200, where your net income exceeds $246,752.
Multigenerational Home Renovations
In 2023, we saw the launch of a new tax credit, the Multigenerational Home Renovations. Eligible individuals can claim up to $50,000 in qualifying expenses for each qualifying renovation that was incurred after December 31, 2022 (but before the completion of the renovation). You can receive a tax credit of 15% of your costs; and the maximum credit is $7,500.
Every person’s situation is unique, and there are other tax credits not mentioned above that may apply. We can work with you and your accountant, bookkeeper, or tax preparer to create a plan that works for you. Contact one of our Financial Advisors today to review your situation and see how we can help!
Allison Martin is a Financial Advisor with Assante Capital Management Ltd. The opinions expressed are those of the author and not necessarily those of Assante Capital Management Ltd. Please contact her at 613.258.1997 or visit ofarrellwealth.com to discuss your circumstances prior to acting on the information above. Assante Capital Management Ltd. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.