Tax-filing season is here, which means millions of Canadians will be looking to save money via tax credits. So, here we look at four common tax credits that will lower your tax bill in 2023.
Basic Personal Amount
The Basic Personal Amount, or BPA, is a non-refundable tax credit you can claim annually. The BPA is capped at $14,398 for 2022, which means you can claim $2,159.70 (15% of $14,398) as tax credits. The BPA will increase to $15,000 in 2023 and will be indexed to inflation in the future.
Childcare expenses
A few tax credits provide benefits to parents of children below the age of 18. Parents can claim expenses if they have employed someone to look after their children, allowing them to either work, study, or run a business.
GST/HST credit
This tax credit is provided to low- and middle-income Canadian households, allowing them to offset a portion of the taxes they pay on relevant products and services. This tax credit is paid four times a year.
Home Buyer’s Amount
If you are a first-time home buyer in Canada, you can avail of the Home Buyer’s Amount, another non-refundable tax credit. The Home Buyer’s Amount can reduce federal taxes by a maximum of $1,500.
Once you have availed the tax credits you qualify for, try to allocate a portion of these savings towards buying undervalued stocks trading on the TSX.
Martinrea International stock
A manufacturing company, Martinrea International (TSX: MRE), is valued at a market cap of $1.14 billion. It increased sales to $4.45 billion in 2022, while reporting adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $516 million. So, the company is priced at less than 0.3 times trailing sales, which is very cheap.
Despite a challenging macro environment, Martinrea International expects to increase free cash flow in 2023, showcasing the resiliency of its business model.
The TSX stock offers investors a forward dividend yield of 1.4% and trades at a discount of 35% to consensus price target estimates.
Ag Growth International stock
A company that operates in the agricultural sector, Ag Growth International (TSX: AFN), manufactures and distributes handling, storage and conditioning equipment for grain and rice. As part of a recession-resistant sector, Ag Growth stock is priced at 13 times forward earnings. Comparatively, its adjusted earnings are forecast to increase by 10% annually in the next five years.
Ag Growth reported its third consecutive year of record sales and adjusted EBITDA results in 2022 due to organic growth efforts. Its revenue was up 22% year over year at $1.46 billion, while adjusted EBITDA surged 33% to $235 million, indicating a margin of 16.1%.
In 2023, the company expects full-year adjusted EBITDA at $260 million, an increase of more than 10% year over year. Its consolidated backlog is also up 10% year over year, which suggests Ag Growth should continue to drive sales higher in 2023 as well, probably by a double-digit percentage.
Analysts tracking the TSX stock expect it to gain 15% in the next 12 months.
