Tax management is essential, whether there’s a crisis or not. If you’re a taxpayer, you want to reduce your tax bill as much as possible. Every tax season, the goal is to owe less to the Canada Revenue Agency (CRA) and take advantage of tax credits or deductions available.
Fortunately, you can avail of several tax deductions that taxpayers often overlook or are unaware they exist. You can increase your tax savings from three little-known deductions. In the next tax season, you’ll be glad you found out about them, because you can claim the deductions to lessen your financial obligation to the government.
1. Home Office Tax Credit
Many Canadians would be claiming the home office tax credit. Employers are permitting employees to work remotely. If you’re using your home as an office, you can claim this tax credit. Self-employed individuals doing or conducting business at home know this credit even before the stay-at-home directives.
You can deduct home office expenses based on the space (per square footage) or portion of the house you use as an office. Assuming the area is 15% of the total space, you can claim 15% off on insurance, mortgage interest, property tax, and utilities.
2.Home employees
Some taxpayers employ or hire spouses or children to bring down tax obligations. Make sure the hiring is legitimate, because the CRA strictly monitors this type of claim. While it pads your business expense, you can’t hire your spouse or child on pretense.
Your family members must be performing actual work or tasks a regular employee would do. Likewise, the salary should be commensurate to the job responsibilities.
3. Transfer tax credit
If your spouse or common-law partner has tax credits, but the tax obligation isn’t high enough to cancel out the taxes upon application, transfer the excess to you. Married individuals use this often.
The higher-income earner can offset the tax due, and the couple ends up with a lighter tax burden. The expenses or amounts could be from tuition, education, textbook, pension, and caregiver.
Increase tax-free earnings
While working on your tax deductions, you can increase your tax-free earnings too. Contribute to your Tax-Free Savings Account (TFSA). Purchase shares of the National Bank of Canada (TSX:NA) and hold the bank stock in your TFSA. The sixth-largest bank in Canada is outperforming its bigger industry peers in the stock market.
This $22.79 billion bank also pays a respectable 4.26% dividend. More importantly, all dividend earnings within your TFSA are tax-free. You can opt to hold the stock to receive recurring income for years.
National Bank is one of the largest employers in Quebec. To help bring people back to the workforce, the bank opened a new call centre in Sherbrooke. The project is worth $5.4 million and will create 200 new jobs. People of all ages will have professional opportunities.
Double windfall
Canadian taxpayers have several ways to lower tax bills, earn tax credits, or claim tax deductions. However, you’ll hit two birds with one stone by complementing your tax savings with tax-free earnings from your TFSA.
